AUGUST 30, 2010, 3:07 P.M. ET
The combined assets of the nation's mutual funds jumped by $415.3 billion in July, or up 4% from the prior month, on strength in the stock market, but that didn't translate into fresh money from investors.
Instead, equity outflows accelerated from June while bond funds continued to see strong inflows, according to data released Monday by the Investment Company Institute. ICI reported the total mutual fund figure grew to $10.92 trillion in July.
Bond funds have thrived in attracting money, as they typically do in a lower-interest-rate environment, while equity funds have failed to consistently get new investment for more than a year despite 2009's sharp rally. ICI has reported inflows for 12 consecutive weeks for long-term mutual funds, with almost all of the money going into bond funds.
On Monday, ICI said long-term funds--stock, bond and hybrid--had a net inflow of $19.3 billion in July, more than June's $15.48 billion. Bond-fund inflows more than offset outflows from stock and hybrid funds. The $10.43 billion pulled out of equity funds last month, with U.S. funds seeing $11.12 billion of outflows, came as major stock indexes posted their biggest monthly gain in a year.
ICI said that considering historical investor patterns for the past 20 years, it is currently seeing weaker investor demand for such mutual funds than those patterns would lead it to expect. The fund-industry group typically sees greater inflows into U.S. equity funds at this point in the market cycle, and would expect those inflows to be coming now, particularly given the current savings rate among U.S. households.
So far in 2010, $515.6 billion has flowed out of money-market funds, primarily related to the current low yields on those funds, said ICI. Funds invested in U.S. equities have shown outflows for three months, while international equities have reported net inflows through July. Bond funds, meanwhile, attracted net new cash flow of $185.6 billion so far this year.
The decreased demand for U.S. equity funds and the shift toward bond and international equity fund investing began in 2005 and, with the exception of 2008, continues to this day, ICI said. On factor is the fact international stock markets have generally outperformed U.S. stock markets in dollar terms during the past several years.
-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com
From The Wall Street Journal published on AUGUST 30, 2010, 3:07 P.M. ET