January's "Great Rotation"

Fund Outflows? Blame the 'Cliff'
Excerpt:

The first few weeks of 2013 have seen a stark shift in investor attitudes in favor of stocks, a trend being dubbed the "Great Rotation," that has helped push U.S. benchmarks to around five-year highs. So far this month, investors have added a net $55 billon to stock mutual funds and exchange-traded funds—a monthly record—according to TrimTabs Investment Research.

... In the fourth quarter, contentious negotiations in Congress to avert looming spending cuts and tax increases cast a pall over the stock market, driving the Standard & Poor's 500-stock index down 1% and causing investors to pull their money out of the stock market. That hurt results even at historically strong performers like T. Rowe Price.

... Across all types of T. Rowe Price funds, investors pulled a net $4.2 billion in the fourth quarter, its first quarter of net outflows since the third quarter of 2011. Assets under management still inched up 0.4% to end the quarter at $576.8 billion, as $6.6 billion in market gains offset the fund withdrawals. Institutional accounts outside the U.S. were responsible for a large chunk of outflows, losing a net $3.8 billion. But T. Rowe's mutual-fund business also took a rare hit, seeing a net $1.4 billion withdrawn from its stock and blended-asset funds.

... Waddell & Reed also saw investors flee its mutual funds in the fourth quarter, although at less of a degree than some analysts expected. The company reported fourth quarter outflows of $165 million, far less than the $400 million Sandler O'Neill analyst Michael Kim was expecting, for instance.

Comment: Explains the strong January in the stock market