Mutual fund investors added about $24 billion in net new cash to U.S. stock and bond funds in May, Strategic Insight reported Monday. The data showed a slight decline from April’s $27 billion of net inflows.
The survey results, which track investments in long-term open-end and closed-end mutual funds excluding exchange-traded funds, suggested a rise over the month in investor anxiety about future economic growth, according to Strategic Insight, a New York-based business intelligence company.
“Signs of a lull in the U.S. economy’s recovery damped investors’ fragile confidence and suggests that the Federal Reserve will keep interest rates near record lows through 2011,” said Avi Nachmany, Strategic Insight’s director of research, in a statement. “If rate hikes are postponed until 2012, then 2011 will see ongoing demand for selected bond mutual fund strategies.”
Mutual fund flows were led by bond funds and international equity funds, with bonds seeing net inflows of $20 billion in May as investors continued to put money into taxable bond funds rather than low-yielding cash vehicles. Overall, taxable bond funds drew $19.9 billion in May.
Municipal bond funds had net outflows of roughly $0.2 billion, or almost no net outflows, on fewer worries about municipal bond default rates.
However, U.S. investors withdrew nearly $3 billion in net new cash from domestic equity funds in May in a reaction to disappointing economic and employment news, marking the first month of net outflows from U.S. equity funds since December’s net outflows of $8.5 billion.
“Investors have still put net $39 billion into U.S. equity funds through the first five months of the year. Net withdrawals from U.S. equity funds were relatively modest in May, suggesting that setbacks in the recovery may cause dips in investors’ confidence,” Nachmany said.
International and global equity funds saw almost $7 billion in net flows in May, despite continued turmoil in the Middle East and North Africa.
Separately, Strategic Insight estimated that exchange-traded funds (ETFs) in May experienced roughly $6.5 billion in net outflows, the first month of net outflows from ETFs after eight consecutive months of net inflows. Most of the net outflows came from U.S. equity ETFs, which saw $10.5 billion in net outflows compared with $11.3 billion in net inflows in April. Meanwhile, $2.5 billion of net inflows went into bond ETFs.
At the end of May, U.S. ETF assets stood at $1.11 trillion, down from $1.13 trillion a month earlier. Despite a pullback in May, ETFs are still on pace to log their fifth straight year of at least $100 billion in net inflows.
Read FRC Says $45 Billion Flowed Into Equity, Fixed Income Mutual Funds in April at AdvisorOne.com.