The Dow Jones Industrial Average dipped 2.54% from its September closing value in October, while the NASDAQ Composite fell 4.46%. During the same period, investors pressured Treasury prices, which pushed yields up a bit; the yield curve’s increases ranged from one basis point for three-month Treasuries to 10 basis points for seven-year paper, according to the latest monthly fund overview issued by Lipper.
How did these trends translate into mutual-fund flows? “For the fourth consecutive month, investors were net purchasers of fund assets, injecting $30.5 billion into the conventional funds business (excluding exchange-traded funds),” explained Tom Roseen, head of research services for Denver-based Lipper in his October report.
Plus, despite becoming more risk averse, investors injected $34.2 billion in bond funds. They also put $300 million into stock and mixed-asset funds, but withdrew $4 billion from money-market funds.
October was the 18th straight month of outflows for domestic equity funds, with $10.2 billion leaving this group. Of Lipper’s 12 classes, just two—small-cap growth funds and multi-cap core funds—experienced net inflows. “Large-cap funds once again suffered the largest net redemptions (–$6.9 billion) of the capitalization breakouts—for their 41 consecutive month of outflows,” noted Roseen.
World-equity funds had $1.6 billion of net withdrawals, which was the group’s third-consecutive month of redemptions. In addition, Lipper’s global-diversified equity funds group had $1.9 billion in withdrawals. Global flexible-portfolio funds and international multi-cap core funds, however, had the largest net inflows of the group at $900 million each.
Sector-equity funds also continued to sit well with investors. Though the commodity and global natural-resource fund groups each lost $400 million in assets, other natural-resources funds and specialty/miscellaneous funds each had inflows of $300 million. “Of the 22 Lipper classifications in the sector-equity macro group, six witnessed net outflows for the month,” noted Roseen.
Investors added $10.2 billion in assets to mixed-asset funds in October. Flexible-portfolio funds took in $2 billion, while absolute-return funds added $1.7 billion.
“The mixed-asset target date funds subgroup attracted about $5.7 billion, while the primarily broker-recommended mixed-asset target allocation funds took in a net $1.1 billion,” the Lipper analyst shared.
Mixed-asset target allocation growth funds had outflows of $800 million, but mixed-asset target allocation moderate funds grew by $1.2 billion). Mixed-asset target 2025 funds had inflows of $1 billion.
Investors were net buyers of bond funds for the 14th-consecutive month; net inflows topped $34 billion in October, the largest level of net new money since March 2010. Close to $30 billion went into taxable bonds and about $4.5 billion in tax-exempt funds.
Intermediate investment-grade debt funds had inflows of close to $ billion, followed by U. S. mortgage funds ($3 billion) and multi-sector income funds ($2.5 billion). Corporate debt BBB-rated funds had $900 million in inflows, though general U.S. Treasury funds suffered $100 million in net redemptions.
Intermediate municipal-debt funds added $1.3 billion, and New York intermediate municipal debt funds produced just $68,000 in net inflows, putting the category at the bottom of the subgroup, according to Roseen.
Mutual fund investors were net redeemers of money-market fund assets in October, when they took out $4.0 billion. Two money-market classifications had net inflows: U.S. Government money-market funds ($2.5 billion) and institutional U.S. Treasury money-Market Funds ($2.2 billion). Institutional U.S. Government markets had net outflows of $4.7 billion, while money-market instrument funds fell by $1 billion.
“On the tax-exempt side (–$1.4 billion net) only four of the 10 classifications took in net new money,” Roseen explained.