December 15, 2010

Mutual Fund Flows for November: Bonds Slow, Equities Improve

KBW analysts forecast weaker flows for December, but a comeback in 2011

In its latest report on monthly net mutual fund flows released Tuesday, Keefe, Bruyette & Woods analysts Robert Lee and Larry Hedden conclude that fixed-income flows appear to be decelerating, helped by municipal bond outflows in November.

Meanwhile, equity flows are showing some signs of life, with managers such as BlackRock, Franklin and T. Rowe Price generating at modestly positive equity fund flows during the month.

As muni-bonds negatively impacted bond outflows in November, international products contributed to positive inflows into equity funds. Overall, equity funds attracted close to $18 billion in the month, while fixed-income funds lost $2 billion, KBW reports.

Asset allocation and blend products continue to gather flows, Lee and Heeden conclude, as investors seek defensive-equity positions.

However, they believe equity flows could slow in December due to the holiday season, though such flows could recover, at least modestly, in the first quarter of 2011.

“While fixed income flows have slowed, we expect flows to fixed income to remain positive and the main driver of flows into 2011,” the report said. “However, any relative improvement in equity fund flows is constructive for asset management stocks in general, in our view.”

Among Lee and Hedden’s top picks in the group are Affiliated Managers Group and Invesco.

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