US Bond, Stock Mutual Funds See Net Outflows of $2 Billion in June 2011, $50 Billion Inflows in Q2

In a month that experienced difficult market conditions (the S&P 500 and MSCI EAFE both declined), US mutual fund investors net redeemed $2 billion in cash out of US stock and bond mutual funds in June 2011, says Strategic Insight.
 
July 14, 2011 - PRLog -- Uncertainty over the economy and unemployment increased in June, sparking US mutual fund investors to net redeem an estimated $2 billion in cash out of US stock and bond mutual funds in June 2011 (in open-end and closed-end mutual funds, excluding ETFs and funds underlying variable annuities). June marked the first month of net outflows from long-term funds since December (when investors net redeemed $16 billion from stock and bond funds), according to Strategic Insight, a business intelligence provider to the worldwide fund industry.

In total, the second quarter of 2011 saw $50 billion in net new flows go to US stock and bond mutual funds. That was down from the $87 billion in net new flows to long-term funds experienced in Q1 of 2011.

June’s net outflows came amid difficult market conditions. The S&P 500 Index lost 1.7% during the month and the MSCI EAFE Index dropped 1.2%, as investors fretted about slowing jobs growth, the U.S. deficit and European sovereign debt. Investor confidence dropped, resulting in net outflows of $17 billion for US equity funds. International/global equity funds saw net inflows of more than $2 billion, a drop from May’s $6.6 billion.  

“US investor confidence is clearly fragile and will remain so for the foreseeable future. Naturally, this may result from time to time in volatile flows for US equity funds, the segment that most mutual fund owners associate with the economy,” commented Avi Nachmany, SI’s Director of Research. “However, many individual actively managed US equity funds, especially those with strong convictions, continue to take in net inflows.”

In June, taxable bond funds took in net flows of $12 billion as investors continued to seek income and less-risky means of participating in financial markets. As worries over municipal defaults eased, tax-free bond funds drew nearly $1 billion in net inflows in June – their first month of net inflows since taking in net $1.7 billion in October.

“With so much uncertainty, we are not expecting the Federal Reserve to aggressively raise interest rates until at least 2012, a factor which should help certain bond funds continue to draw robust net inflows,” said Mr. Nachmany.

In the second quarter overall, US stock funds saw net outflows of $14 billion and international equity funds saw net inflows of $nearly $16 billion. Taxable bond funds drew $51 billion in net inflows and tax-free bond funds saw net outflows of $3 billion in the second quarter.


ETFs: Separately, Strategic Insight estimated that investors poured an additional $10.6 billion into US Exchange-Traded Funds (ETFs) in June, a reversal from the $6.5 billion in net outflows that ETFs experienced in May. U.S. equity and taxable bond ETFs led the way in flows. In the second quarter of 2011, total net inflows to ETFs were $30.5 billion, up slightly from the $27.7 billion of net inflows in Q1 2011. This put ETFs on pace for their fifth straight year of $100 billion or more in net inflows. At the end of June, US ETF assets totaled $1.09 trillion, down from $1.11 trillion at the end of May due to market performance. “We continue to believe that ETFs in the U.S. will reach $2 trillion in assets before 2016,” 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.
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