Demand for international exposure prompted U.S. mutual fund investors to add only $6.8 billion in net new cash to stock and bond mutual funds in November 2010, according to the research released Monday from Strategic Insights.
This represents a significant slowdown from October flows, which totaled $28 billion, says the research group, which measures monthly flows into open-end and closed-end mutual funds, excluding ETFs and funds underlying variable annuities.
A growing focus on international diversification, particularly increasing allocation to emerging markets, led to $8.7 billion in net inflows into U.S.-based international and global stock funds in November, according to Strategic Insights.
This marked the sixth-straight month that international and global equity funds saw positive flows, the New York-based group says. In the first 11 months of 2010, investors have put a total of $58 billion into international and global equity mutual funds.
Meanwhile, U.S. equity funds experienced net outflows in November, estimated at under $1 billion. This was an improvement from October and the smallest amount of net outflows since April.
“Rebalancing out of U.S. equity funds in the wake of the financial crisis has been fairly modest considering the volatility and uncertainty in the markets since early 2009,” said Avi Nachmany, SI’s director of research, in a press release. “And as financial confidence slowly rebuilds, U.S. equity funds should benefit in the coming years.”
In November, Strategic Insights predicted that the global mutual fund industry was on pace for $850 billion in net inflows to stock and bond mutual funds — including ETFs and funds underlying variable annuities — in the full year 2010. More than half of those flows were expected to end up in funds domiciled outside the United States.
In 2009, $890 billion went into stock and bond funds worldwide.
Bond-fund total returns turned negative in November, and bond funds experienced net outflows of about $1.3 billion.
Investors redeemed $7.4 billion from muni-bond funds and added modestly to taxable-bond funds.
According to Strategic Insights, this marked the first month of net outflows for bond funds in two years, since December 2008, when outflows from both taxable and muni-bond funds totaled $6.8 billion.