TrimTabs Investment Research said an outflow of $34 billion was recorded in December 2013 for US-listed bond mutual funds and exchange traded funds, Reuters reported. This was the fourth-highest outflow recorded as interest rates rise and the price of fixed income assets get reduced.
Last month, the average bond fund went down 1.4% and brought the total drop last year to 5.7%. In a note, TrimTabs Chief Executive Officer David Santschi said that as a result of this, it was not surprising that the outflows increased. A total of $33.1 billion was redeemed for bond mutual funds while $900 million was withdrawn for ETFs, the report said.
TrimTabs said that this was the seventh month in a row that bond funds had posted outflows, potentially shocking asset managers who were used to seeing steady inflows for credit funds year after year. A total of $352 billion was poured by investors into all equity mutual funds and ETFs for the entire year in 2013 which outperformed the previous record of inflows in 2000 of $324 billion. The benchmark Standard & Poor's 500 index also increased 29.6% last year.
In a report dated January 1, 2014, Bloomberg reported that bond mutual funds in the US recorded investor withdrawals amounting to $80 billion for 2013 as investors anticipate a rise in interest rates. According to Investment Company Institute Chief Economist Brian Reid in an interview, those redemptions through December 23 last year made up 2.3% of bond fund assets. The report said the previous annual record for bond fund redemptions happened in 1994 when investors withdrew an estimated $62 billion in one full year. This represented 10% of assets.
Bloomberg reported that bond funds lured investors in the early part of 2013 until May when Chairman Ben S. Bernanke of the Federal Reserve suggested that the central bank could begin tapering its monthly bond purchases.
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