Mutual Funds See Gains At Dramatically Slower Pace

Long-term funds took in $370 billion in cash contributions globally, according to Strategic Insight (SI).  

“Year-to-date results through July are markedly lower than the same period in 2010, when flows reached $570 billion, yet much better than the $170 billion in net redemptions for the first seven months of 2008. SI estimates $90 billion in net outflows for August globally—compared to $270 billion in redemptions during October 2008,” said Daniel Enskat, Senior Managing Director and Head of Global Consulting for SI. “On a product level, selected fixed income and equity themes, multi-asset income, ETFs, real estate, commodity, and selected alternative products are continuing to attract new cash flows.”

Slightly positive flows in Asia partially offset redemptions from Europe in August, where greater market concerns over the sovereign debt crisis during the month resulted in $75 billion in net outflows. 

“In the past, spikes in net redemptions in response to market volatility were typically short-lived and limited in scope,” said Enskat. “Strong outflows from long-term funds in both Europe and the U.S. in October and November 2008 were followed by a sharp rebound in flows in the first half of 2009. Until recently, three-month rolling flows have stayed at around $100 billion. 

“The fund industry has faced and weathered uncertain economic times at many points in the past, but the current market volatility seems structurally different from prior crises.”

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