According to Strategic Insight (SI), an Asset International company, the previous quarterly flows record, $173 billion, was set during the first quarter of 2012. Stock and bond funds are projected to accumulate an all-time record of more than $500 billion of net inflows for all of 2013, driven by renewed demand for equities and sustained demand for bond and income funds, SI said.
Year-to-date through March, stock and bond mutual fund and ETF assets have expanded by nearly $800 billion, benefitting from record net inflows and strong market appreciation. Generally positive economic news on labor and housing markets contributed to double digit returns for major U.S. fund sectors so far in 2013, which should stimulate more demand for such funds in the months ahead.
Excluding ETFs, long-term stock and bond funds attracted $49 billion in March and $193 billion for the first quarter. U.S. equity funds netted $13 billion during March, setting an all-time high for quarterly net inflows at $49 billion.
“As investors move from the sideline, we observe two Great Rotations in parallel and both should persist,” said Avi Nachmany, SI’s director of research. “One prominent rotation is along the traditional risk curve, with money flowing to stock investments. The other is from un-invested cash and into income vehicles, anchored by a semi-permanent state of investment anxiety by many, as well as by the demographic of wealth. Both such foundations of the insatiable search for income will continue to drive demand for conservative investment among the population nearing retirement.
“However, as the economy recovers rising interest rates are inevitable,” he added. “Investors and their advisers would respond by protecting their portfolios against risks associated with rising interest rates, perhaps through flexibly managed bond and income funds.”
Exchange-traded products (including ETNs) attracted $15 billion of net intake in March, bringing quarterly net intake to $53 billion. Stock-oriented products accounted for $10 billion of ETP monthly inflows increasing quarterly intake to $46 billion. Taxable bond ETPs attracted $5 billion of monthly net flows, bringing first quarter flows to $7 billion.
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