The Markets April 12, 2011

U.S. Mutual Funds See $23B in Inflows in March

U.S. mutual fund investors added an estimated $23 billion in net new cash to U.S. stock and bond mutual funds in March 2011, according to Strategic Insight, an Asset International company.
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Propelled by demand for international equity funds and taxable bond funds, the data show that in total, the first quarter of 2011 saw $85 billion in net new flows go to U.S. stock and bond mutual funds. That was the best quarterly showing for long-term fund flows since the $124 billion of net inflows experienced in Q1 of 2010, SI said. 

A rise in investor confidence, bolstered by gradually improving economic and employment news, led the return of investors’ appetite for domestic equity funds in Q1 2011, although stronger flows to such funds in January and February slowed to a trickle in March. In all, Q1 2011 saw $35 billion in net flows to U.S. equity mutual funds, the first quarter of positive flows to U.S. equity funds since Q1 2010.    

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International and global equity funds experienced $10.6 billion in net inflows in March, as investors’ secular drive to globalize their portfolios was relatively unfazed by conflict in Libya and Japan’s earthquake and nuclear plant crisis, according to Strategic Insight. In 2011’s first quarter, a total of $30 billion in net inflows went to international equity funds – especially global equity funds, as flows to emerging markets funds slowed in the quarter.   

Bond funds experienced net inflows of $13 billion in March, as investors continued to put money into taxable bond funds in a search for alternatives to low-yielding cash vehicles. Overall, taxable bond funds drew $15.6 billion in March and $40 billion total in Q1 of 2011. Floating Rate and Global Bond funds again led the way in net inflows during March.   

Muni bond funds continued to see net outflows in March, although the net outflows of $2.7 billion were smaller than February’s net outflows, which were smaller than January’s. Investors continue to worry about the finances of many states and municipalities, but outflows from muni bond funds have been slowing on a lessening of fears of a wave of municipal bankruptcies.   

With the positive net inflows and solid stock-market performance of 2011’s first quarter, U.S. stock and bond mutual fund assets ended March 2011 at near $8.2 trillion, up more than $3.5 trillion from the stock market’s bottom of March 2009. Adding gains among ETFs and VA funds, the asset recovery over the past two years exceeded $4.5 trillion. Fund industry assets have rebounded due to both market performance and about $700 billion in net inflows into bond funds and, to a much smaller extent, stock funds since March 2009.   

Data & Research April 12, 2011

Boomers Feeling a Bind in Saving for Retirement

An MFS survey found 59% of non-retired Boomers agree with the statement, "I'm more concerned than ever about being able to retire when I thought I would."
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The MFS Investment Management’s Investing Sentiment Survey found half agreed that they have lowered their expectations about what life would be like in retirement. However, when it comes to investing, 30% of Boomers reported a net decrease in the risk they were willing to take to achieve higher returns over the last 12 months; only 12% reported a net increase.   

MFS also reported that Boomers are approximately evenly split when describing their primary investing goal: 34% reported it to be growing assets/increasing portfolio value as much as possible while 33% reported protecting principal/not losing money as their primary goal. Nearly four times as many Boomers would describe themselves as protective investors (37%) vs. opportunistic investors (10%).  

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Boomers’ average asset allocation included 26% of their portfolios in cash. Only 13% of Boomers surveyed reported having $1 million or more in median household investable assets, while on average, retirement was within 10 years.  

“Boomers appear to be in a bind, knowing they need to save more for a retirement that is not far off, but they have a protective mindset driving their investing approach,” said William Finnegan, senior managing director of retail marketing for MFS, in the press release. “In light of this sentiment, advisers should discuss with their clients both the risks associated with investing too aggressively or too conservatively as they approach retirement.”

MFS sponsored the survey from February 7-14, 2011, of 596 individual investors with $100k+ in household investable assets and 610 licensed financial advisers (either FINRA or SEC) who have been licensed for at least three years with at least $500,000 or more in annual mutual fund sales. All investor respondents make or share in making financial decisions for their households. Boomers refer to those 46 to 64 years old. 

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