July 20, 2011

'Nervous Investors' Redeem $42 Billion From Funds in June

Equity funds saw $22 billion in outflows, but bond funds drew $21 billion

For the first month in five, investors were net redeemers of fund assets, withdrawing a close to $42 billion from the conventional funds business, according to a Lipper report released early Wednesday.

Flows from stock and mixed-equity funds dropped by nearly $20 billion, while some $43 billion moved out of money-market funds. Bond funds, on the other hand, gathered more than $21 billion in assets last month.

“For the second consecutive month, investors were net redeemers of [U.S. diversified equity, or USDE] funds in June, pulling out $21.9 billion,” said Tom Roseen, head of research services for Lipper, in the recent report, entitled "Nervous Investors Redeem $41.8 Billion from the Conventional Funds Business in June." 

Large-cap funds lost about $11 billion, experiencing their 25th consecutive month of outflows. Multi-cap core funds, though, had inflows of nearly $1 billion, attracting the largest inflows of the macro-group.

World-equity funds grew by $4 billion with institutional investors injecting net new money into this category. World-equity funds added $200 million.

Bond funds drew more than $21 billion in net purchases, but investors unloaded about $3 billion of loaded funds.

The Dow Jones Industrial Average lost 1.24% in June, notes Roseen, losing ground for the second month in a row, and the NASDAQ dropped by 1.24%.

In fixed income, Treasury bonds with maturities of less than one year saw the yield curve shift down, while for the longer-dated maturities, yields rose between 0 and 18 basis points. The benchmark ten-year Treasury yield finished the month 13 basis points higher at 3.18% The yield on the two-year bond remained the same for the month at 0.45%.

Other Fund Groups

Sector equity funds witnessed net redemptions of $1.5 billion), with science & technology Funds losing $0.5 billion). Commodities general funds added $0.4 billion for June.

Of the 21 classifications in the sector equity macro-group, 11 had net outflows.

Groups with inflows included health/biotechnology funds ($0.3 billion) and utility funds ($0.2 billion).

For the thirteenth consecutive month, Lipper analysts say, mixed-equity funds saw net inflows, drawing in $3.3 billion, which was the largest inflow of Lipper’s four major equity macro-groups for the third consecutive month.

In June, flexible-portfolio funds and absolute-return funds grew by some $1.8 billion and $0.7 billion net, respectively. Mixed-asset target allocation conservative funds took in a net $1.8 billion.

In bond funds, investors were net purchasers picked up about $16 billion on taxable issues and $5.5 billion of tax-exempt funds. High current-yield funds lost nearly $7 billion, suffering the worst net redemptions of the taxable group.

General municipal-debt funds had more than $3.5 billion in net inflows.

For June, investors also withdrew a net $43.1 billion from money markets. The tax-exempt group collectively shed a net $5.1 billion during the period, according to Lipper.

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