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Mutual Fund Wrap-Up: Fund Flows Have Strong Q1, April

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According to EPFR Global, investors have been on edge recently over the damage that Greece’s fiscal problems might do to bank balance sheets, Europe’s growth prospects and the ability of riskier sovereign borrowers to tap credit markets.

Europe equity funds tracked by the research group posted their biggest weekly outflow in nearly a year during the week ending May 5, as commodity-sector funds had their best week on record. Meanwhile, emerging-markets, global bond, U.S. and Japan funds continued to enjoy robust inflows, as did energy and technology funds.

EPFR Global-tracked bond funds posted collective net inflows of $3.8 billion in early May, while equity funds recorded outflows of $1.43 billion. In addition, money market funds experienced net outflows of over $18 billion.

Fund Performance

As for fund performance, Lipper data through May 13 indicates that bull/ultra/long funds are at the top of the charts, along with Russia, real estate and financial funds. The Fidelity Select Banking Fund, for instance, is up 28 percent this year.

Over the past four weeks, the bear/ultra/short funds have naturally done well.

Precious-metal funds tracked by Lipper are up 14.7% through May 13, while real-estate funds have ticked up 16.7% and financial-sector funds 13.5 percent.

In fixed income, the Lipper HI Current Yield category has improved 5.4% so far this year, while BBB rated bonds are up 4.5%.

April Data

Data tracked by Morningstar for April 2010, found that U.S. open-end mutual funds gathered nearly $41 billion in assets, bringing year-to-date inflows to $165.1 billion.

Meanwhile, money market funds continued to bleed assets, with investors pulling $118.8 billion from these funds during the month, Morningstar reports.

Total outflows for money markets have reached $443.0 billion in 2010, surpassing the outflows for all of calendar year 2009.

Year-to-date net inflows for ETFs reached $19.9 billion after $12.2 billion in inflows in April. Flows were positive for all ETF asset classes during the month.

Domestic-stock funds had inflows of $6.3 billion in April, the largest inflow for the asset class since May 2009. April was also the first month of positive flows into actively managed U.S. stock funds since May 2009.

While taxable-bond funds retained their dominant position with inflows of $22.1 billion in April, support waned for municipal-bond funds, which had a rather lackluster month with inflows of $989 million.

Target-date funds have continued to steadily gather assets year to date, with inflows of $20.5 billion through April. These funds represent a significant percentage of total flows at many fund shops, accounting for more than half of Fidelity’s total flows and almost 40% of T. Rowe Price’s over the past 12 months.

Real-estate funds, bolstered by strong returns over the trailing 12 months, have gathered $1.5 billion in assets this year through April, which is the category’s best start since 2007.

Vanguard gathered the most mutual fund assets in April of any fund family with $8.6 billion. Hotchkis and Wiley, Matthews Asia, and Osterweis also saw strong inflows in April.

ETF Flows

Small- and mid-cap U.S. stock ETFs experienced solid inflows in April, gathering assets of $1.9 billion and $976 million, respectively. Large-cap ETFs as a whole suffered outflows of about $1.5 billion in April, led by steep outflows of roughly $4.6 billion from SPDR S&P 500 SPY.

Taxable-bond ETFs continued to have strong inflows. Short-term bond ETFs took in $517 million in April, reflecting investors’ preference for the short end of the yield curve.

Still ranking third in terms of ETF assets, Vanguard continued to take market share from its biggest competitors, iShares and State Street. Vanguard has had about $11.8 billion in total net inflows year to date and has more than doubled its ETF assets over the past year.

Investor demand for emerging-markets exposure partly fueled inflows of $5.6 billion to international-stock ETFs in April.

Fidelity Corporate Bond

Fidelity Investments rolled out the Fidelity Corporate Bond Fund with retail and advisor shares this week.

The fund will “seek to provide a high level of current income by normally investing at least 80 percent of assets in investment-grade corporate bonds and other corporate debt securities, and repurchase agreements for those securities,” the company said in a statement.

Fidelity will compare its performance to the Barclays Capital U.S. Credit Bond Index, a market value-weighted index of investment-grade, corporate fixed-rate issues with maturities of one year or more.

“With this new fund, we’re able to offer investors targeted exposure to corporate bonds, which represent about 20 percent of the investment-grade bond market,” said Christopher Sullivan, president of Fidelity’s Bond Group in a press release. “Through the fund, investors and advisors will gain access to the debt of many of the largest and most successful companies in America.”

Acknowledging that there is a possibility of rising interest rates, which may provoke investor concern about the near-term bond returns, Sullivan explained, “[H]istorical data shows that even during periods of rising rates, the frequency and magnitude of negative returns for bonds was far lower than that for stocks, suggesting an allocation to bonds still reduced the volatility of an investment portfolio.”

Fidelity also announced the addition of advisor-share classes (class A, C, T, and institutional) for Fidelity Real Estate Income Fund, which will be offered through financial advisors at institutions such as brokerage firms, banks, and insurance companies.

SteelPath: MLP Funds

Earlier this week, Dallas-based SteelPath introduced SteelPath MLP Funds, the first mutual fund family to provide access to the Master Limited Partnership asset class.

“Without the burden of K-1s, or state and UBTI tax filings to the shareholder, the SteelPath mutual fund platform creates a transparent and liquid energy infrastructure MLP access product,” the company said in a statement.

The three new funds, SteelPath MLP Income, SteelPath MLP Select 40, and SteelPath MLP Alpha, focus on energy-infrastructure MLPs. This asset class consists of companies that own and operate the physical assets that transport crude oil, refined petroleum products, and natural gas, such as pipelines, as well as the associated storage facilities.

“These companies’ long term contracts and toll road business models have minimal exposure to commodity prices,” according to SteelPath.

“The SteelPath MLP Funds provide 1099 tax reporting, qualified dividend treatment of taxable distributions, low investment minimums, and full daily liquidity at a transparent NAV,” said portfolio manager Gabriel Hammond in a release.

“The funds are an especially compelling new option for IRA and 401(k) plans that were previously unable to benefit from the potential steady returns and high income offered by MLPs,” he added.


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