US Stock & Bond Mutual Funds See Net Outflows of Under $10 Billion in May 2010

June 11, 2010 - PRLog -- Despite the return of extreme volatility to financial markets, US mutual fund investors withdrew a net of only roughly $7 billion from stock and bond mutual funds in May 2010 (in open-end mutual funds, excluding ETFs and funds underlying variable annuities). May’s modest redemptions contrasted the nearly $170 billion of net inflows to stock and bond funds in the first four months of 2010 (the bulk of which went to bond funds), according to Strategic Insight, a business intelligence provider to the worldwide fund industry.

Besides alarming stock market declines – the average stock fund investor lost 8% in May – investors faced European debt and currency worries. These factors, not surprisingly, triggered net redemptions of $16 billion from equity funds in May, according to Strategic Insight’s Simfund database. Such redemptions amounted to just 0.3% of equity fund assets. Stock fund redemption activity slowed to a trickle by month-end.  .

Bond funds experienced net inflows of $8 billion in May. Inflows persisted among many bond funds used for cash management. Other kinds of bond funds (high-yield, global income), where price deterioration occurred due to economic uncertainty or Euro depreciation, experienced modest outflows.

“In the context of nearly $7 trillion in stock and bond fund assets, May’s outflows are moderate. This speaks to the loyalty that long-term investors have to the mutual fund vehicle,” commented Avi Nachmany, SI’s Director of Research. “Given global economic worries, risk-aversion should continue to trigger bond-fund demand. Yet some investors may see the price pullback as a buying opportunity.”

Separately, Strategic Insight estimated that investors put net $3.5 billion into US Exchange-Traded Funds (ETFs) in May. Because of the month’s market declines, US ETF assets dropped to $793 billion (from $843 billion at the end of April). Fixed-income ETFs – especially lower-volatility taxable bond ETFs – accounted for the bulk of May’s net inflows, while gold and emerging markets equity ETFs also saw inflows. “The diversity of the ETF market supports continued net inflows to these increasingly mainstream vehicles,” said Loren Fox, a senior research analyst at Strategic Insight.

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Strategic Insight, an Asset International company, is a leading research firm for the mutual fund and wealth management industry, providing clients with in-depth studies, consultation, and electronic decision support systems.