Mutual Fund Outflows Continue

Slight gains for bonds can't make up for equity drops

Assets continue to pour out of long-term mutual funds, according to data from the Investment Company Institute (ICI) for the week ended March 4, which showed estimated total outflows of $21.1 billion. The majority of that ($19.8 billion) came from equity funds, which had lost almost $18 billion the previous week.

The same week was also the occasion of a slowdown in new money coming into bond funds, with only $767 million being added to taxable bonds funds and $796 million to municipal bond funds. A month earlier, taxable bonds pulled in $3.67 billion and munis $1.4 billion.

The weekly performance in early March follows what had appeared like a promising start to the year for mutual funds. According to data released by Strategic Insight, in the first two months of 2009, investors contributed a net $44 billion into open-end mutual funds. About two-thirds of that cash (around $30 billion) was put into money market funds.

Bonds also drew net inflows of about $30 billion in the first two months of the year, the research company reported.

In its release, Strategic Insight noted that the outflow experienced by equity mutual funds "represents minimal redemption activity from stock funds considering the low confidence in the economy and markets being experienced. Indeed, the redemptions in February were equivalent to less than half of one percent of equity fund assets (a lower proportion than experienced in past bear markets)."

Strategic Insight also issued a separate report on ETFs which noted net outflows of $7 billion in January and February 2009, with net inflows for fixed-income ETFs unable to compensate for the flood of assets fleeing equity funds.

Estimated Flows to Long-Term Mutual Funds

(millions of dollars)

2/4/2009

2/11/2009

2/18/2009

2/25/2009

3/4/2009

Total Equity

-710

-2,436

-1,003

-17,955

-19,754

Domestic

10

-460

336

-12,374

-13,343

Foreign

-719

-1,976

-1,340

-5,581

-6,412

Hybrid

-635

-182

-361

-2,595

-2,973

Total Bond

5,090

5,783

4,414

3,387

1,563

Taxable

3,667

4,394

3,392

2,577

767

Municipal

1,422

1,390

1,022

810

796

Total

3,745

3,166

3,050

-17,162

-21,165

Source: ICI

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