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Strategic Insight: Flows into U.S. Stock and Bond Mutual Funds Decline in April

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Net inflows into U.S. stock and bond mutual funds dipped 17% in April, a new survey reveals.

Strategic Insight, New York, published this finding in a summary of results from a report on open-end and closed-end mutual funds, excluding exchange-traded funds and funds underlying variable annuities.

Net inflows into long-term U.S. stock and bond mutual funds in April totaled $26.5 billion. This compares with net inflows of $32 billion in March.

The report attributes the decline to “continued uncertainty over the U.S. economy and the economic and fiscal status of the Eurozone.” In April, the report says, domestic equity funds saw net outflows of nearly $6 billion, during a month of lackluster U.S. stock demand: The benchmark S&P 500 Index generated a total return of -0.6% in April amid trading volumes that were down more than 8% from the trailing 12-month average.

That brought total US equity fund flows to -$6 billion for the first four months of 2012, a sharp reversal from the first four months of 2011, when U.S. equity funds enjoyed cumulative net inflows of $41.9 billion.

International / Global equity funds offered some relief, drawing net inflows of $10.4 billion in April, the best month for these mutual funds since March 2011. In the first four months of 2012, international equity funds drew aggregate net inflows of $26.5 billion.

Separately, Strategic Insight says U.S. exchange-traded funds saw roughly $3 billion in net inflows in April 2012. That brought total ETF net inflows to $58 billion for the first four months of 2012, a pace that could result in the sixth straight year of $100 billion or more in annual net inflows to US ETFs.

Bond ETFs were the only major category to post net inflows in April, drawing net $5 billion. Equity ETFs saw an estimated $2.5 billion in net outflows, with both domestic and international equity products seeing net redemptions, the report says.

At the end of April 2012, US ETF assets (including ETNs) stood at $1.204 trillion, up from $1.06 trillion at the end of December.

“Investors remain in a holding pattern, as economic growth rates declined or turned negative in a number of key markets,” says SI Director of Research Avi Nachmany. “The fragile state of investor confidence will benefit bond fund inflows in the near future, as investors stayed centered on income strategies.”


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