Stock and Bond Mutual Funds Started Year Strong

While some of the net inflows were due to seasonal deposits, the month’s activity continued the trend of investors tiptoeing back into financial markets, SI said in a press release. January 2010’s long-term fund inflows marked a significant improvement over net inflows in both the previous month ($23 billion) and in January 2009 ($24 billion).

Investors put about $30 billion into bond funds in January, according to estimates from Strategic Insight’s Simfund database. Inflows were experienced in both taxable bond funds ($25 billion) and municipal bond funds ($5 billion).

Roughly $5 billion net flowed into domestic equity and hybrid funds in January, a sign of slowly growing confidence despite a decline of 3.6% in the S&P 500 Index during the month. Investors put $10 billion into international equity funds, even though January was a down month for international stock indexes.

Separately, SI said exchange-traded funds (ETFs) experienced an aggregate $18 billion of net outflows during January, led by more than $15 billion of withdrawals from the SPDR S&P 500 ETF, the industry’s largest ETF (which SI noted typically experiences outflows in January due to early-year portfolio adjustments by investors).

SI’s estimates include open- and closed-end mutual funds, but exclude funds underlying variable annuities or ETFs.