Mutual Funds Could Hit Flows Record

Stock and bond mutual funds are on track to set an all-time quarterly flows record, nearing $200 billion, in the first quarter of 2013.

According to Strategic Insight, an Asset International company, the first two months of 2013 marked net flows of $140 billion into stock and bond funds, the best start for the mutual fund industry on record.   

Long-term stock and bond funds attracted $50 billion in February, following January record net intake of $90 billion. Accelerated seasonal deposits in early January were followed by more modest flows in February, as budget uncertainty and a down-trending stock market late in the month slowed fund demand. For context, average monthly flows throughout last year were below $30 billion.  

Positive news on the economy such as housing and unemployment will continue to bring more investors back to the stock market. Demand for income fund strategies through flexibly managed bond and income funds should persist also in 2013. Looking ahead, though, investors and their advisers are likely planning to protect their portfolios against risks associated with rising interest rates in the years ahead.

“So far in 2013, half of the industry’s record net flows went to international stock and bond funds. Investors in America, and elsewhere, continue to recognize that our world becomes more interconnected, and it is necessary to spread one’s risk and wealth creation aspiration broadly and globally,” commented Avi Nachmany, SI’s director of research.  

Lifecycle mutual funds (target-date and target-risk) assets grew to $744 billion in February. Target-date mutual fund assets surpassed $500 billion and have attracted $16 billion of net new flows during the first two months of 2013.   

“This year we expect annual net inflows to target-date funds to surpass the record, set in 2007, of $58 billion,” said Bridget Bearden, head of SI’s defined contribution research. “The first two months of 2013 have demonstrated how significant the target date opportunity is, particularly as the job market slowly improves and more employers adopt the strategy for their retirement savings plans.”  

Exchange-traded products (including exchange-traded notes (ETNs)) attracted $8 billion of net intake in February. Stock-oriented products accounted for $7 billion of ETP inflows (net of $4 billion of gold exchange-traded fund (ETF) redemptions), while taxable bond ETPs attracted $1.5 billion of monthly net flows.