The Markets April 13, 2011

U.S. Stock Flows Fall in March

The pace of long-term inflows slowed slightly to $27 billion in March, from nearly $28 billion in February, due largely to a drop in U.S. stock flows, according to the Morningstar Direct Fund Flows Update.
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After nearly $26 billion of inflows in January and February combined , U.S. stock funds saw $934 million in March outflows. International-stock funds, by comparison, took in a relatively robust $6 billion, the Morningstar report said. That was driven by nearly $2.7 billion in emerging-market inflows, after the category had experienced anomalous, modest outflows the previous month.

Taxable bonds slightly surpassed February’s haul with $18 billion in inflows, as bank-loan funds led the way with $4.3 billion. Municipal-bond outflows slowed for a third consecutive month, with less than $2.6 billion in outflows. Still, more than $40 billion has vacated municipal-bond funds over the last five months, which represents 7.8% of beginning total assets.   

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Demand for alternative and commodity funds remained steady with $1.1 and $1.8 billion, respectively, in inflows. Finally, money market funds saw $12.5 billion in net outflows. Unlike past months, outflows were roughly even between taxable and tax-free offerings. 

According to the Morningstar report, within U.S. stock funds, large-cap offerings returned to the penalty box, shedding about $3.2 billion across the value, blend, and growth categories. On the other hand, small-cap funds continued to enjoy inflows, although with a modest $800 million. While large-cap funds have rallied with the market, small-cap funds continue to get the better of them.  

As a result, small-cap stocks trade at about a 25% premium to large-cap stocks based upon forward P/E ratios. This small-cap preference generally hasn't held with international-stock funds. In March, large-cap funds acquired $3.6 billion in new money versus just $300 million for small-cap offerings. This pattern has held over the last three years as well, with large-cap foreign-stock funds absorbing $23.2 billion versus $3.5 billion for small caps.   

That's in sharp contrast with U.S. stock funds, Morningstar said. Large-cap funds have suffered $147.4 million in outflows against about $14.7 billion in small-cap inflows. 

Deals & People April 13, 2011

Towers Watson Adds Account Director

Towers Watson announced that Helen Mills has joined the company as an account director for its greater New York metropolitan area.
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In this role, Mills will focus on business development activities in the New York region, Washington, D.C., and broad support across the east division. Mills will be based in the company’s New York City and Parsippany, New Jersey, offices beginning on April 18, 2011.

According to the announcement, Mills has more than 25 years of industry business development experience with a track record of marketplace success. She specializes in selling and leading complex, integrated human resource solutions to large U.S.-based and global companies. Additionally, she is a leader in corporate social responsibility initiatives.

Prior to joining Towers Watson, Mills spent 15 years with Aon Hewitt and Aon Consulting in various account management and leadership roles. Her most recent position was market leader for Aon Hewitt’s greater New York region. She also held management positions in Fairfax, Virginia, Atlanta and Nashville. Mills joined Aon Consulting in 1996 after selling her firm, The Mills Group, to Aon.

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