U.S.-based muni funds post first outflows since July ’14: ICI

By Sam Forgione

NEW YORK (Reuters) – Investors in U.S.-based mutual funds pulled $187 million out of municipal bond funds in the week ended April 8 as retail investors sought to raise capital to pay taxes, data from the Investment Company Institute showed on Wednesday.

The outflows occurred ahead of the April 15 U.S. tax filing deadline and marked the first weekly cash withdrawals from the funds since early July of last year, according to the data from ICI, a U.S. mutual fund trade organization. Municipal bonds are tax-exempt.

“It’s primarily related to taxes,” said Brian Rehling, co-head of global fixed income strategy at the Wells Fargo Investment Institute in St. Louis. He said yields on municipal bonds were attractive compared to taxable bonds and that selling pressure could create opportunities for investors to buy municipal debt.

Funds that hold taxable bonds attracted $1.9 billion, resulting in overall inflows of $1.7 billion into bond funds. That marked a rebound in demand after investors pulled $1.3 billion out of the funds the prior week, which marked the first outflows from the funds in 12 weeks.

Rehling said a weak U.S. employment report for March released over the period likely helped demand for bond funds recover, since it suggested the Federal Reserve would wait longer before raising interest rates.

Stock funds overall attracted $1.9 billion in new cash, marking their first inflows in three weeks.

Appetite for funds that specialize in international stocks accounted for the total inflows, with $3.2 billion flowing into those funds to mark their 14th straight week of inflows, while funds that specialize in U.S. stocks posted $1.3 billion in outflows to mark their sixth straight week of withdrawals.

Hybrid funds, which can invest in stocks and fixed income securities, attracted $251 million. That marked their lowest inflows in 12 weeks.

The following table shows estimated ICI flows for the past five weeks (all figures in millions of dollars):

4/8/2015 4/1 3/25 3/18 3/11

Total equity 1,916 -1,527 -1,167 1,948 3,911

Domestic -1,315 -3,307 -4,478 -1,758 -7

World 3,231 1,780 3,311 3,706 3,918

Hybrid* 251 720 538 912 851

Total bond 1,719 -1,302 2,404 452 1,298

Taxable 1,906 -1,398 1,701 258 999

Municipal -187 96 703 194 298

Total 3,886 -2,109 1,775 3,312 6,059

*Hybrid funds can invest in stocks and/or fixed income securities.