From the June 2010 issue of Research Magazine • Subscribe!

June 1, 2010

Investors Leaving Money Markets, As Flows Go to Bonds, Equities

Research analysts tally the latest fund flows by investment type and category, as well as by fund family.

According to the latest Lipper research, investors withdrew nearly $150 billion from money market funds in March, their 14th straight month of net redemptions. They chose to pump money into both bond funds (+$36 billion) and stock and mixed-equity funds (+$27.5 billion).

Overall, bond funds experienced net inflows for the 15th consecutive month, and for the third month in a row stock and mixed-equity funds gained assets.

Meanwhile, world equity funds (+$11.2 billion) attracted large net inflows as well. In the fixed-income area, intermediate investment-grade debt funds took in $9.6 billion in March.

For the full quarter, U.S. diversified-equity funds took in $15.9 billion, and world equity funds attracted net $28.5 billion, notes Tom Roseen, research manager for the Americas at Lipper.

For the one-year period ending March 31, sector equity funds had $21.6 billion of net inflows, of which close to 60 percent or $13 billion went into commodities funds. During the first quarter, sector equity funds drew in a net $6.2 billion.

In March, for the third consecutive month, investors were net redeemers of fund assets, withdrawing some $85.9 billion from conventional funds such as money markets but excluding ETFs.

When flows of money markets and proprietary funds of funds are taken out of the fund-flow data, though, Financial Research Corporation found that stock and bond funds experienced net inflows of $70.0 billion in March.

The corporate bond objective led the net inflow category with $24.5 billion, followed by the domestic equity objective with $18.2 billion, FRC says. Pimco's Total Return fund attracted $4 billion to lead the fund sales charts.

Estimated net flows by Morningstar category for the month were roughly $11 billion to intermediate-term bonds, $6 billion to short-term bonds, $5 billion to world bonds, $4 billion to high yield bonds, $3 billion to large blend funds and $3 billion to world-allocation funds. Other categories, such as inflation-protected bonds, had flows of between some $1 billion and $3 billion for the month.

Vanguard continued to top the list of the largest fund groups at $1.2 trillion in assets.

In terms of fund families that have grown the most in the first quarter of 2010, JPMorgan Asset Management increased 12.42 percent.

Other groups with 9 percent growth or higher include Pimco, Eaton Vance, Goldman Sachs Asset Management and Lord Abbett.

Several individual funds with gains of more than $2 billion in assets in March are the Pimco Total Return Fund, SPDR S&P 500 ETF and Templeton Global Bond Fund.

In the first quarter, the Pimco Total Return Fund grew by $12 billion in assets, while the Templeton Global Bond Fund added $5 billion in net flows.

The industry had some $8 trillion in fund assets as of March 31, including a jump of about $132 billion in the first quarter of 2010.

In 2009, some $1.1 billion in outflows was tallied by FRC, indicating that fund flows are now making a significant recovery from last year.

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