As investors show their concern about domestic stocks, reflected in lower inflows to domestic equity funds, their demand for income is displayed in sharply higher inflows to bond funds in the first half of 2010. In figures released Thursday, July 15, by Strategic Insight (SI), a business intelligence provider to the fund industry, inflows to bond mutual funds totaled $138 billion.
Taxable bond funds were by far the most popular, with net inflows of $120 billion. Much of that $120 billion went to short- and intermediate-term corporate bond funds as investors seek to retain some liquidity while increasing yield. Tax-free bond funds claimed another $18 billion, although there is still close to $10 trillion dollars in highly liquid form – cash in banks and money funds – despite investors’ need for something superior to the near-zero yields offered by such caches.
Other figures show that inflows to foreign equity funds follow an interest in greater diversification. Net inflows for the first half of 2010 of $34 billion saw $10 billion go to emerging markets equity funds, outpacing investments of $7 billion in the same period of 2009.
Domestic equity funds showed investors’ distaste for risk, as net inflows of less than $4 billion in the first half of 2010 were small in comparison to other markets. However, that shows an improvement over 2009, in which there was a negative flow of $25.8 billion from domestic equity funds.