April 19, 2011

Hybrid Funds See Record Flows

Assets reach highest point since data tracking began

More money than ever is flowing to mutual funds that buy both stocks and bonds, a sign that individuals are starting to return to equities during the most volatile bull market since at least 1942.

Bloomberg reports about $18.6 billion was added to so-called hybrid funds last quarter, the most since the Investment Company Institute started tracking the data in 1984. The record flows show that while investors remain skittish after the worst financial crisis since the Great Depression, they want more equities after the Standard & Poor’s 500 Index doubled since March 2009.

Europe’s sovereign debt crisis and rising oil prices are spurring the widest price swings since 1942, Bloomberg noted, providing investors with another reason to limit purchases after pumping 232 times more money intodebt funds over the last two years. That’s bullish to Fiduciary Trust Co. and Credit Suisse Asset Management, which say the doubts mean more money is available in what is already the biggest rally since 1955.

“It’s a chicken step into the equity market,” Michael Mullaney, who manages $9.5 billion at Fiduciary Trust in Boston, told Bloomberg. “Very few investors, especially on the retail side, have been on board with this rally. That’s why we think this market still has legs to run because one major investor still hasn’t shown up to the party.”

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