U.S. Fund Investors Put $24 Billion Into Stocks, Bonds in May: Strategic Insight

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.