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Stock Funds Have Most Withdrawals in a Year as Bonds Gain

Stock mutual funds in the U.S. had the biggest withdrawals in more than a year as investors accelerated their flight to the perceived safety of bonds even as equities rallied.

Domestic stock funds had redemptions of $10.6 billion and those buying non-U.S. equities lost $483 million to withdrawals in the week ended Oct. 3, the most since Aug. 10, 2011, according to the Washington-based Investment Company Institute. Investors added $10.9 billion to fixed-income funds in the week, the ICI said today in an e-mailed statement. ICI’s weekly estimates do not include data for exchange-traded funds.

“It is possible as the quarter came to an end, some investors may have been rebalancing their portfolios,” Geoff Bobroff, a mutual-fund consultant based in East Greenwich, Rhode Island, said in a telephone interview.

Investors have pulled money from funds that invest in domestic stocks every year since 2007, while putting money into bond funds. Investors pulled $38 billion from stock funds in the first eight months of 2012, data from Chicago-based Morningstar Inc. show. They added $204 billion to bond funds over the same period.

BlackRock Inc.’s Chief Executive Officer Laurence D. Fink has been urging investors for more than a year to buy equities as the U.S. economy expanded and the stock market rallied. The New York-based firm this month started an advertising campaign telling savers to get out of cash and low-yielding bonds.

The Standard & Poor’s 500 Index climbed 1.2 percent in the week ended Oct. 3, according to data compiled by Bloomberg. The benchmark index has gained 14 percent this year.

Last week’s withdrawals were the most since investors pulled $28.7 billion from stock funds in August 2011, which was trigged by an unprecedented downgrade of the U.S. government’s credit rating and concerns that European governments would fail to contain the sovereign-debt crisis.

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