Jul 12, 2012 --- Investors stayed tense over global economic growth, with estimated net inflows of just $13 billion into stock and bond mutual
funds in the U.S. in June. ---
June marked the smallest amount of
positive net flows to long-term funds since December, when long-term mutual
funds had net outflows of $22 billion, according to Strategic Insight, an Asset
Domestic equity funds registered
their fifth consecutive month of net outflows, experiencing net outflows of
nearly $8 billion. The net outflows in June came even though the average U.S.
equity fund generated a 3.4% return for the month, on an asset-weighted basis.
“For many fund shareholders, risk aversion will persist as a theme in the face
of volatility. Gains in the stock market have not emboldened investors, who
worry about the ever-present risk of future losses,” said Avi Nachmany, SI’s director
of research. Nachmany noted that the S&P 500 index gained 4.1% in June,
only to drop 1.4% through July 11.
International equity mutual funds
drew net inflows of just over $5 billion in June, as investors willing to take
on risk favored international total return funds and emerging market equity
funds. International/global equity funds drew $17 billion in the second
Bond mutual funds saw net inflows of
$15 billion in June, up from $14 billion in May. Taxable bond funds saw net
inflows of $11 billion for the month, as investors continued to use bond funds
as income-producing alternatives to money market funds, CDs, and bank deposit
accounts. There has been some evidence of investors diversifying their fixed
income exposure, because while short- and intermediate-term and general
corporate bond funds led June’s net inflows, mortgage-backed, high yield, and
emerging markets bond funds also drew healthy inflows in the month. For the
second quarter, taxable bond funds saw net inflows of $38
Muni bond funds saw net inflows of
$4 billion in June and money market funds saw net outflows of $42 billion.
Ultra-low yields continued to hamper demand for money market funds–a trend that
resulted in net outflows of $66 billion in 2012’s second quarter.
“When we look at the first half of
2012, we see much of what should be expected in the second half. Given the
Federal Reserve’s current commitment to low interest rates and the lack of
positive surprises in U.S. economic figures, we anticipate investors will
continue to favor the relatively lower risk of bond funds over equity funds in
coming months,” Nachmany said.