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Inflows for equity funds, led by gold and energy-Lipper

Thursday, 11 Oct 2012 | 7:36 PM ET

By Daniel Bases and Sam Forgione

NEW YORK, Oct. 11(Reuters) - U.S.-domiciled equity funds pulled in a modest $1 billion in the week ended Oct. 10, with much of the fresh cash moving into gold and energy exchange-traded funds (ETF), data from Thomson Reuters' Lipper service showed on Thursday.

Taxable bond funds pulled in nearly $2.3 billion in new capital, extending their inflow streak to 14 weeks, with sizeable new investment in government-backed mortgage and corporate investment grade sectors.

For the first time in many weeks both retail and institutional investors were on the same wavelength when it came to equities in general. They were sellers.

Excluding ETF activity, retail investors pulled a net $1.1 billion from equity funds. At the same time the broad-based equity ETFs such as State Street's SPDR S&P 500 ETF fund

had outflows of $939 million while the Invesco Powershares QQQ Trust 1 ETF

had net redemptions of $555 million.

ETFs are generally believed to represent the investment behavior of institutional investors, while mutual funds are thought to represent the retail investor.

U.S. stock markets were undermined by the concerns of weak demand affecting corporate profits. The International Monetary Fund cut global economic growth forecasts for the second time since April to 3.3 percent, adding that unemployment is likely to remain elevated because of the weak activity.

"People are preparing for maybe a worse-than-expected earnings season as a whole," said Matthew Lemieux, analyst at Lipper.

Retail mutual funds have had net sales 11 out of the past 12 weeks while institutional investors have been buyers of ETF's marginally more than sellers of these funds over the same period of time.

In the course of the reporting week, the U.S. benchmark Standard & Poor's 500 stock index fell 1.27 percent

. The Nasdaq stock market, which is often seen as a proxy for technology companies, slid 2.6 percent.

In the fixed income sector, funds investing in U.S. Treasuries suffered net outflows of $1.12 billion, their worst performance in over three months. However, government guaranteed mortgage backed bond funds maintained their appeal with $648 million in net inflows, extending their unbroken streak of fresh capital to nearly one year.

Money market funds had net outflows of $506 million while tax-free municipal bond funds pulled in $915 million, extending their inflow streak to six months.

GOLD BUYING

The buying of gold funds came in contrast to a loss over the course of the reporting week in spot gold prices, which fell over $15 an ounce to $1,762.74. Prices rose slightly since then.

"Gold fell, but it's still seen as a hard asset. So, in the medium to long term, if you still consider inflation an issue, then eventually you're betting that that price is going to go up," Lemieux said on the inflows into gold exchange-traded funds.

State Street SPDR Gold Fund

had its best week since late August with $939 million in new cash moving into the fund, despite the drop in the cash market price.

Central banks, in particular the U.S. Federal Reserve and the European Central Bank, have maintained a steady policy of low interest rates and monetary stimulus that some investors believe will inevitably lead to rising inflation. Gold, priced in U.S. dollars, is seen as way to safeguard against inflation.

The 3.5 percent rise in crude prices over the course of the week helped draw in $594 million in fresh cash to the State Street Energy SPDR ETF

.

The weekly Lipper fund flow data is compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds.

The following is a broad breakdown of the flows for the week, including exchange-traded funds (in $ billions):

Sector Flow Chg % Assets Count ($Bil) Assets ($Bil) All Equity Funds 1.009 0.03 2,873.324 10,089 Domestic Equities -0.214 -0.01 2,181.221 7,481 Non-Domestic Equities 1.224 0.18 692.103 2,608 All Taxable Bond Funds 2.279 0.15 1,476.030 4,652 All Money Market Funds -0.506 -0.02 2,281.675 1,400

All Municipal Bond Funds 0.915 0.29 314.489 1,338

(Reporting By Daniel Bases and Sam Forgione; Editing by M.D. Golan)

((daniel.bases@thomsonreuters.com)(+1 646 223 6131)(Reuters Messaging: daniel.bases.reuters.com@reuters.net))

Keywords: INVESTING FUNDFLOWS/LIPPER

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