The first four months of 2013 attracted $293 billion of net intake in total for stock and bond funds and ETFs, roughly 50% more than net flows experienced during the same period last year. Equity funds specifically have attracted $175 billion through April, three times the pace experienced in 2012.
“Overall, we observe two great rotations in the mutual fund industry (not just one). One, from $10 trillion+ zero-yield cash to other income vehicles, mostly bond funds. Another, from uninvested money to capital appreciation vehicles, as investors re-engage and move up their personal risk curve,” said Avi Nachmany, Strategic Insight’s director of research. “Both trends are likely to continue.”
“While spiking stock prices explains some of the hesitation among some stock fund investors lately, dollar-cost averaging remains an attractive long-term strategy,” added Nachmany. “Indeed, as time horizons of most stock investors saving for retirements are measured in decades not months, it is reassuring to observe that since early 2000, stock fund investors earned over $2 trillion in profits, during years of bubbles, price collapse, recessions, and recoveries.”
According to Strategic Insight, stock and bond funds attracted $39 billion in April, bringing year-to-date total to $232 billion. U.S. equity funds attracted flows of $9 billion in April, bringing annual intake thus far to $58 billion, a significant turnaround from the anxiety that plagued stock funds since 2008.
In addition, lifecycle mutual funds (target-date and target-risk) assets grew to $784 billion in April. Target-date mutual fund assets accounted for $538 billion and netted $28 billion of net flows during the first four months of 2013.
Mutual fund share classes designated specifically for defined contribution retirement plans (often referred to as R-shares) grew to $596 billion across strategies. “As 401(k) plans and other defined contribution plans cement themselves as the default retirement savings vehicle for most Americans, product providers’ focus on distributing to these plans has become more pronounced,” said Bridget Bearden, head of Strategic Insight’s defined contribution research.
Exchange-traded products (including ETNs) attracted $8 billion of net intake in April. Stock-oriented products accounted for $1 billion of ETP inflows (inflows elsewhere were matched by net redemption among gold and emerging market ETFs), while taxable bond ETPs attracted $7 billion of monthly net flows.
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