The Markets August 11, 2010

July Fund Flows Edge up to $14B

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. 

Reported by

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.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

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.

 

(Cont...)

Vanguard and PIMCO Shine with Bond Funds  

According to the Morningstar data, Vanguard and PIMCO continue to be the big winners as investors flood into bond funds. PIMCO took in $5.9 billion in July, while Vanguard added $4.9 billion. PIMCO Total Return dominated inflows with $2 billion, though its monthly take continues to taper off. Monthly flows for the fund peaked at nearly $6 billion in October 2009 and have been waning ever since.

Sibling PIMCO Unconstrained Bond Fund is continuing to enjoy strong momentum with a $615 million inflow. Its popularity mirrors that of the multisector-bond category overall.  Alternatively, Morningstar reported, American Funds continues to suffer tremendous outflows, as it watched another $4.6 billion walk out the door in July.

Even Vanguard's equity funds have fared well, especially its passive offerings. Bucking the trend among its domestic-equity peers, Vanguard Total Stock Market Index absorbed $1.3 billion in new money in July.

Morningstar said the same trend shows up among international-stock funds, in which nearly $700 million was added to passively managed funds, while more than $1.2 billion was withdrawn from their actively managed peers.

The full Morningstar report is at http://www.global.morningstar.com/julyflows10.   

Products August 11, 2010

S&P Launches Factor Index Series

Standard & Poor's has launched the S&P Factor Indices which seek to measure the risk premium inherent between asset classes and financial markets. 

Reported by

Each index in the S&P Factor Index Series is comprised of an equal-weighted long and short sub-index calculated to reflect the corresponding spread. The Long Sub-Index is comprised of long front futures contracts; the Short-Sub-Index is comprised of short front futures contracts.   

According to a press release, the objective of each index in the series is to provide investors with exposure to the price difference between Sub-Indices, and in turn, the underlying futures contracts. The Indices are calculated on a real-time basis.  

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

The following factors are represented in the S&P Factor Index Series: 

  • Equity Risk Premium: Measures the spread of the U.S. stocks over the returns of long-term Government Bonds;  
  • Non-U.S. Dollar Equity: Measures the spread of the return of U.S. stocks over the return of the U.S. Dollar Index; 
  • Crude Oil – Equity Spread: Measures the spread of the return of Crude Oil over the return of U.S. stocks; and  
  • Gold – Equity Spread: Measures the spread of the return of gold over the return of U.S. stocks. 

For more information on the S&P Factor Index Series, including methodology, index calculations and additions/deletions criteria, visit http://www.indices.standardandpoors.com.

 

«