Investors pulled cash out of stock mutual funds for the seventh month in a row, as the European debt crisis continued to drive U.S. market volatility in November.
Investors withdrew a net $16.1 billion from U.S. stock funds last month, extending a string that began in May, industry consultant Strategic Insight said on Monday.
Stock funds attracted new cash during the first four months of this year, on the heels of strong market gains in late 2010. But the market was dominated this summer and fall by fears that Europe's debt crisis was getting impossible to contain.
As the continent's leaders struggled to come up with a debt-control plan, U.S. stocks again followed a volatile path last month. The Standard & Poor's 500 index slid about 9 percent in mid-November before recovering most of its gain to finish down less than 1 percent for the month.
"With the market still gyrating, investors still lack enthusiasm" for U.S. stock funds, said Avi Nachmany, research director with New York-based Strategic Insight.
Through November, investors withdrew a net $65 billion from stock funds. That exceeds the full-year total of 2010, when they pulled a net $49 billion from stock funds. Investing has taken a more conservative turn since the financial crisis of 2008, with money consistently flowing out of stock funds, and bond funds continuing to attract new cash.
Other details of how investors moved their money in November:
— Foreign stock funds: Investors withdrew a net $2.6 billion from these funds, as debt troubles in Europe and slowing economic growth in China continued to depress stock prices in many foreign markets. Through November, investors have deposited a net $45 billion into foreign funds, reflecting expectations that China and other emerging markets such as India and Brazil continue to have good long-term prospects.
— Bond funds: Investors deposited a net $11.9 billion in November. About $9 billion in new cash was added to taxable bond funds, a category that includes corporate bonds. About $2.9 billion was deposited last month into municipal bond funds, which buy the debt of state and local governments. Year-to-date, bond funds have attracted nearly $104 billion in new cash.
— Money-market funds: A net $42 billion was deposited into these funds last month, marking a reversal from the $21 billion in net withdrawals in October. Strategic Insight said investors appeared to increasingly view money-market funds as a safety net from stock market volatility. They're designed to be safe harbors where investors can temporarily park cash and quickly access it when needed. Net withdrawals from money fundstotal $173 billion year-to-date. Their appeal has dimmed because returns have been barely above zero since early 2009.
— Exchange-traded funds: Investors deposited a net $5 billion into ETFs, which bundle together investments in a particular market index. Unlike mutual funds, they can be traded during daily sessions just like stocks. ETFs continue to grow much faster than mutual funds, with year-to-date net deposits of nearly $94 billion. At that rate, ETFs could end 2011 with more than $100 billion in new cash for the fifth year in row.