Stock funds worldwide post $10.1 billion outflows over week - BofA

By Sam Forgione

NEW YORK (Reuters) - Investors worldwide pulled a net $10.1 billion out of stock funds in the latest week on aversion to risk assets in response to a pullback in U.S. stock prices, data from a Bank of America Merrill Lynch Global Research report showed on Friday.

The outflows, for the week ended Oct. 1, were the biggest in eight weeks, according to the report, which also cited data from fund-tracker EPFR Global.

U.S.-focused stock funds accounted for $9.6 billion of the net outflows, and most of the net outflows came from stock exchange-traded funds, the report showed.

Bond funds attracted a net $9.1 billion in new cash, their biggest in six weeks on account of $10.4 billion in inflows into investment-grade bond funds. Riskier high-yield bond funds posted $3.7 billion in outflows, marking their biggest withdrawals since record outflows in early August, data from the report showed.

The report said, however, that the net inflows into bond funds were "likely overstated" since they did not account for outflows from asset manager Pimco.

The Pimco Total Return Fund, the world's largest bond fund, suffered a record $23.5 billion of withdrawals in September, with its largest daily outflow occurring on the day of former manager Bill Gross's surprise resignation from the firm on Sept. 26.

Funds that specialize in energy stocks accounted for a huge $2.2 billion of the net outflows from stock funds, according to the report. European stock funds posted $1.9 billion in outflows, marking their fifth straight week of withdrawals.

The outflows from stock funds reflect investors' overreaction to some weak economic data over the week, including data showing U.S. manufacturing expanded at a slower pace in September compared to August, said Michael Jones, who oversees $4.7 billion as chief investment officer at RiverFront Investment Group in Richmond, Virginia.

"The normal two steps forward, one step back mechanism of the market has been disrupted by quantitative easing, so people are hyper-sensitive to what I would consider to be a very small pullback in a larger bull market," he said.

Jones said investors poured cash into bond funds in a reach for safety and as a higher-yielding alternative to cash. He said the outflows from energy-focused funds likely stemmed from recent pressure on oil prices.

The benchmark S&P 500 stock index fell about 3.2 percent from a record intraday high on Sept. 19 through Oct. 1. The Federal Reserve is on track to end its massive stimulus program, known as quantitative easing, by October.

Funds that specialize in emerging market stocks attracted a meager $79 million, but emerging markets debt funds posted $400 million in outflows, marking their first withdrawals in six weeks.

Investors continued to avoid floating-rate debt funds and pulled $1.2 billion out of the funds, marking their biggest outflows in eight weeks.

(Reporting by Sam Forgione Editing by W Simon)