Taxable-bond funds continued to dominate fund inflows, according to Morningstar data released Monday, raising the question: Is it 1999 for bond funds?
“The late 1990s equity and early 2000s housing markets were classic asset bubbles,” said Morningstar editorial director Kevin McDevitt, CFA, in the report. “Whether the current bond market is on the same path is a matter of debate, but late-1990s equity-fund flows offer interesting comparisons with recent bond-fund inflows.”
In April, taxable-bond funds collected nearly $17 billion in flows, down from last month’s roughly $25 billion. Yet, taxable-bond funds have collected $96.9 billion in year-to-date inflows and are on track to match 2009’s record $282.5 billion, according to Morningstar.
Across all fund types, long-term fund flows declined to $20.8 billion in March from $29.3 billion in April. Money-market funds lost $17.3 billion, as U.S-stock outflows rose to $9.3 billion.
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The newly formed sector-stock asset class received about $560 million, says Morningstar, most of which went into real-estate funds. Diversified emerging-markets funds once again carried international-stock flows with $2.4 billion in new money.
According to another research group, EPFR Global, bond funds took in a net $7.1 billion worldwide in the week ended May 2, while equity funds absorbed $3.8 billion. Plus, for the full month of April, stock fund outflows were the largest since at least 1996, EPFR Global reported.
Return to Late ‘90s?
Looking at the absolute numbers, McDevitt says, “current bond-fund mania has eclipsed the late equity frenzy.”
From 1995 to 2000, U.S.-stock funds collected $655 billion. Since early 2009, taxable-bond funds have amassed $728 billion. Plus, during that time, total taxable-bond assets doubled to about $2.2 trillion from $1.1 trillion.