US Stock & Bond Mutual Funds See Net Inflows of $13B in June 2012, Nearly $170B in 1H 2012

July 12, 2012 - PRLog -- Investors continued to exhibit anxiety over global economic growth, putting just $13 billion in estimated net inflows into stock and bond mutual funds in the US in June 2012 (in open-end and closed-end mutual funds, excluding ETFs and funds underlying variable annuities). June marked the smallest amount of positive net flows to long-term funds since December, when long-term mutual funds had net outflows of $22 billion, according to Strategic Insight, a business intelligence provider to the fund industry.

In total, long-term mutual funds experienced nearly $52 billion of net inflows in 2012’s second quarter. The first half of 2012 saw total net flows of $167 billion to long-term mutual funds, up from $138 billion in net inflows in 1H 2011. The big difference between 1H 2012 and 1H 2011 is that flows into muni bond funds swung from significant net outflows (-$23B in 1H 2011) to significant net inflows (+$28B). Looking further back, we note that investors added over $850 billion to bond and stock funds (Exc. ETFs) since the financial crisis year of 2008.

In June, domestic equity funds registered their fourth consecutive month of net outflows, experiencing net outflows of nearly $8 billion. The net outflows in June came even though the average US equity fund generated a 3.4% return for the month, on an asset-weighted basis. “For many fund shareholders, risk aversion will persist as a theme in the face of volatility. Gains in the stock market have not emboldened investors, who worry about the ever-present risk of future losses,” said Avi Nachmany, SI’s Director of Research. Nachmany noted that the S&P 500 index gained 4.1% in June, only to drop 1.4% through July 11.

International equity mutual funds drew net inflows of just over $5 billion in June, as investors willing to take on risk favored international total return funds and emerging market equity funds. International/global equity funds drew $17 billion in the second quarter.  

Bond mutual funds saw net inflows of $15 billion in June, up from $14 billion in May. Total bond funds flows were $50 billion in Q2 2012, down from $99 billion in 2012’s first quarter. Taxable bond funds saw net inflows of $11 billion in June , as investors continued to use bond funds as income-producing alternatives to money market funds, CDs, and bank deposit accounts. There has been some evidence of investors diversifying their fixed income exposure, because while short- and intermediate-term and general corporate bond funds led June’s net inflows, mortgage-backed, high yield, and emerging markets bond funds also drew healthy inflows in the month. For the second quarter of 2012, taxable bond funds saw net inflows of $38 billion.

“When we look at the first half of 2012, we see much of what should be expected in the second half. Given the Federal Reserve’s current commitment to low interest rates and the lack of positive surprises in US economic figures, we anticipate investors will continue to favor the relatively lower risk of bond funds over equity funds in coming months,” Nachmany said.

Muni bond funds saw net inflows of $4 billion in June and $12 billion in the second quarter.

Money-market funds saw net outflows of $42 billion in June, compared with net outflows of just $2 billion in May. Ultra-low yields continued to hamper demand for money market funds – a trend that resulted in net outflows of $66 billion in 2012’s second quarter,


ETFs: Separately, Strategic Insight said US Exchange-Traded Funds (ETFs) enjoyed $16 billion in net inflows in June 2012, their best month since February’s $15 billion in net inflows. That brought total ETF net inflows (including ETNs) to $20 billion for the second quarter of 2012 and $75 billion in the first half of 2012. That was significantly better than the $56 billion in net inflows in 2011’s first half. The first-half 2012 pace ($75B) seems likely to result in the sixth straight year of $100 billion or more in net inflows to US ETFs.

The most popular ETF categories in June were large-cap blend (due to big inflows to the SPDR S&P 500 ETF), intermediate-term bond, large-cap growth, long-term bond and diversified emerging markets equities.

At the end of June 2012, US ETF assets (including ETNs) stood at $1.18 trillion, up from $1.06 trillion at the end of December.