US Bond & Stock Mutual Funds See Net Inflows of $23 Billion in March 2011, $85 Billion in Q1

April 12, 2011 - PRLog -- Propelled by demand for international equity funds and taxable bond funds, US mutual fund investors added an estimated $23 billion in net new cash to US stock and bond mutual funds in March 2011 (in open-end and closed-end mutual funds, excluding ETFs and funds underlying variable annuities). In total, the first quarter of 2011 saw $85 billion in net new flows go to US stock and bond mutual funds, according to Strategic Insight, a business intelligence provider to the worldwide fund industry. That was the best quarterly showing for long-term fund flows since the $124 billion of net inflows experienced in Q1 of 2010

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.

“Investors are starting to return to the market and the trauma of the global financial crisis is beginning to heal. As long as the US economic recovery slowly gains momentum, we should see steady demand for US equity funds in 2011,” commented Avi Nachmany, SI’s Director of Research. “Yet, the secular trend for globalization of stock and bond fund assets should also continue in the background of US Dollar and budget uncertainty. Interest in mutual funds in the US and internationally is supported by the renewed appreciation, sparked by the financial crisis, of mutual funds’ transparency, liquidity and closely regulated nature.”  

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 the news-filled 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.

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. 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.

ETFs: Separately, Strategic Insight estimated that investors poured an additional $9.5 billion into US Exchange-Traded Funds (ETFs) in March, the seventh straight month of positive flows to ETFs. International equity and taxable bond ETFs led the way in flows, echoing trends in the larger fund market. In the first quarter of 2011, total net inflows to ETFs were $26 billion. At the end of March, US ETF assets totaled $1.07 trillion, up from $1.1 trillion at the end of 2010. “At this rate, it will only take a few more years for ETFs to hit $2 trillion in US assets,” 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.