August 11, 2010
--- Flows into U.S. open-end funds increased slightly in July to $14.1 billion versus $13.5 billion in June, according to the latest Morningstar fund flow data. ---
A news release said the July fund flow change may have been small, but this difference understated the acceleration in this year's underlying themes: almost universally, outflows picked up in equity and balanced funds; and inflows rose for bond, alternative, and commodity funds.
Morningstar said nearly $12.4 billion exited U.S. equity funds last month, despite a strong rebound in share prices. While the average domestic large-blend fund is still down 6.8% overall during the past three months, the category gained 6.8% in July.
Meanwhile, international-stock funds saw less severe outflows of $565 million overall, but strong flows to emerging markets offset redemptions from foreign large-blend funds.
The Morningstar report said interest in bonds continued to pick up steam, with taxable-bond funds adding $22.3 billion in July, up 26.7% over June’s rate. Results for municipal-bond funds were even more dramatic, with inflows nearly doubling month over month to $3.9 billion.
Alternative and commodity funds continued their surge. Alternative funds took in about $1.7 billion, with the long-short and bear-market categories benefitting most. The bear-market category has amassed $3.2 billion over the past year, despite losses of 24.9% during that time.
In taking a closer look at the international-stock flows, researchers noted, there’s less evidence of this risk aversion, at least as it's traditionally defined. Most of the recent inflows have targeted diversified emerging-markets equity funds rather than the broader foreign-stock funds (foreign large value, blend, and growth). In July, diversified emerging-markets stock funds took in almost $2 billion, while the three major foreign-stock categories saw combined outflows of $624 million.