Flight from mutual funds slows
Investors pull less out of stock-based mutual funds in the recent week, signaling less pessimism.
NEW YORK (CNNMoney.com) -- As the world financial markets continue to thrash wildly, the amount of money pulled from stock mutual funds in the past week was on the decline, according to a report released Thursday - an indication that individual investors were getting a little less pessimistic.
The amount of money withdrawn from funds that invest in both U.S. and non-U.S. stocks fell to $6.5 billion during the week ended Oct. 22, according to TrimTabs Investment Research.
That's noticeably less than the $13.9 billion withdrawn a week earlier.
"A lot of weak stomachs might have been washed out of the market," said David Hinnenkamp, CEO of KDV Wealth Management. "As people get out, it drives the market lower. Only until the toughest are hanging on do you reach a bottom," he said.
Though the amount of money being withdrawn from stock mutual funds has slowed, October was still on track to see the largest monthly cash withdrawal ever, according to TrimTabs.
The months of August, September and October of this year had the highest outflows on record, the report said. Investors have been moving money out of stock-based mutual funds for the past nine consecutive weeks.
The flight from stock-based mutual funds has contributed to one of the largest stock market downturns in decades, according to Kenny Landgraf, principal and founder of Kenjol Capital Management.
"We're seeing something that investors my age - I'm 46 - have never seen before," he said, referring to the past several weeks in which U.S. stocks have been hammered by concern about a global economic slowdown.
Mutual fund outflows contributed to stock declines across the board, since fund managers need to keep their portfolios balanced, according to Landgraf.
"If (as a portfolio manager) you've got $5 million in redemptions coming in, then you sell your losses, or you sell (on a percentage basis) across the board," said Landgraf.
Investors pulled $1.92 billion out of U.S.-based funds, and $4.54 billion out of international funds, according to TrimTabs.
Withdrawals from international funds were much greater because of greater economic weakness overseas, according to Vincent Deluard, an analyst with TrimTabs.
Bond funds: Investors deposited more into bond-based and hybrid mutual funds, TrimTabs reported.
Investors pumped $532 million into bond funds and $249 million into hybrid funds, a sharp reversal of $15.06 billion and $7.06 billion in outflows from the week before.
Many investors had previously taken money out of bond funds and put them into safer U.S. government-backed Treasury bonds, according to Hinnenkamp.
"When you had people pulling money out of (corporate) bond funds, it was the classic flight to safety," said Hinnenkamp. But as government and international actions help thaw the frozen credit markets, one of the economy's main stumbling blocks, "we're seeing a little restored confidence, which also bodes well," he added.
However, TrimTabs also said that investors pulled money out of exchange-traded funds, or ETFs, that invest in U.S. companies in the past week. TrimTabs reported $1.79 billion leaving U.S. ETFs, as opposed to an inflow of $4.21 billion a week earlier.
ETFs are like mutual funds in that they own collections of stocks. But they can be bought and sold like stocks and typically have lower fees than mutual funds. 
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