Mutual Fund Net Inflows Are on Record Pace in 2010, Strategic Insight Says

First four months already has a net inflow of $200 billion

Investors are putting cash into U.S. stock and bond mutual funds at such a rapid clip that full-year net inflows are likely to set a record in 2010.

As investor sentiment has gradually improved, investors have put nearly $200 billion into stock and bond mutual funds so far this year. Even if net inflows slow from this rapid pace, it is likely that full-year net inflows would top $450 billion, making 2010 a record for annual inflows, Strategic Insight (SI), a business information provider to the fund industry, said Tuesday, May 4.

The previous record for annual inflows into stock and bond funds was set last year, when just over $400 billion went into long-term funds, according to SI's Simfund database. These figures include open- and closed-end mutual funds and funds underlying variable annuities, but exclude ETFs.

The near $200 billion that has flowed into stock and bond funds through April of 2010 was only the second time in the history of U.S. mutual funds that inflows during the first four months of the years reached about $200 billion; the previous time was the first four months of 2007, when net inflows to stock and bond funds totaled more than $210 billion.

"Lately we are observing the early signs of thawing of investors' reluctance to get back on the stock market train. Assuming further economic and employment improvements in the coming months, more such investors should inch higher in their risk curve," commented Avi Nachmany, SI's Director of Research. "But turmoil in Europe and the fragility of the U.S. recovery are just a few of the many concerns still on investors' minds."

Strategic Insight made its projections as the fund industry gathered in Washington, D.C., from May 5-7, for the 52nd annual general membership meeting of the Investment Company Institute (ICI), typically the largest mutual fund industry conference for top executives.

For all of 2010, SI projects that U.S. stock and bond fund new sales are on track to rise at least 20% from their 2009 pace.

Worldwide, mutual fund investors have added nearly $1.4 trillion of net flows to bond and stock funds since March 2009's bottom of the financial markets, according to Strategic Insight's Simfund databases, which track more than $20 trillion of fund assets globally. About half of these gains occurred in the U.S. This year through early May, global inflows to stock and bond funds are nearing $400 billion.

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