Bond Fund Flows More than Double from May to June

Taxable Bond fund flows jumped to $22 billion in June, with flows coming in across the quality, duration, and location spectrum. Tax-free bond funds saw flows falling somewhat to $2 billion.  Flows into Emerging Market Bond funds remained strong at $1.4 billion.   

SI said it expects sustained sizeable inflows into the bond fund area as demand for cash substitution is bolstered by interest in flexible bond funds with mandates permitting for defensive approaches in dealing with the prospect of rising interest rates in the coming years. In the first half of the year, long-term funds have drawn about $215 billion on a net basis, with bond funds capturing 70% of that volume, according to SI’s Monthly Fund Industry Review for June 2010.  

Net redemptions from U.S. equity funds eased in June despite average (asset-weighted) losses of 4.88% suffered by these programs over the month, while international/global equity funds received small positive inflows as strong demand for emerging market and flexible global allocation funds served to offset continued net redemptions in aggregate from diversified international/global equity vehicles.   

Actively managed U.S. equity funds saw net redemptions declining to about $6 billion; the net outflows represented 0.22% of the funds’ beginning assets. Actively managed international/global equity funds eked out small positive net flows in June ($3 billion), in aggregate. Actively managed U.S.-focused equity/hybrid funds experienced net redemptions of nearly $7 billion in aggregate in June.   

The Emerging Markets ($2 billion) and Global Flexible Portfolios ($1.5 billion) Lipper classifications dominated flows into actively managed international/global equity/hybrid funds, while active International/Global Lipper equity style box funds experienced collective net redemptions for the second consecutive month.   

The U.S. style box Lipper classifications together with S&P 500 Index and Equity Income funds experienced aggregate net outflows of $5 billion in June. Only Multi-Cap Core ($1.6 billion), S&P 500 Index ($1 billion) and Mid-Cap Core ($300 million) received net inflows.   

Sector-focused funds collectively drew a net $750 million. Net flows into Market-Neutral/Long-Short funds remained strong; the category captured an estimated $1.5 billion in June.   

Funds-of-funds drew a collective $5 billion in June, with a majority ($3 billion) of the flows going into specialized non-lifecycle products.  

Among smaller-size managers of long-term funds, those that led in total long-term fund flows in June were Rafferty Asset Management, DoubleLine Capital, Lazard Asset Management, Hussman Econometric, Matthews Asian Funds, Metropolitan West Asset Management, Pacific Heights, and International Value Advisors.   

Among the largest firms (firms with more than $20 billion in long-term fund assets under management), those garnering the most long-term fund flows over the month were: The Vanguard Group  ($6.5 billion); BlackRock ($5.5 billion); PIMCO / Allianz Global ($5.4 billion); Franklin Templeton ($1.7 billion); Eaton Vance ($1.5 billion); T. Rowe Price ($1.3 billion); and JPMorgan Funds ($1.2 billion). 

ETF June Flows  

Aggregated flows into ETFs/ETNs of all legal structures totaled $11 billion, led by Bond-based, Emerging Market, Gold-oriented, and S&P 500 Index offerings, according to Strategic Insights Monthly Fund Industry Review for June 2010.  

Flows into Open-end ETFs rose to $7.1 billion helped by investors using the vehicles to seek exposure to emerging markets and corporate and US Treasury bond segments. The three highest cash flow individual open-end ETFs in June included two emerging market offerings – BlackRock’s iShares MSCI Emerging Markets Index ($2 billion) and Vanguard’s Emerging Markets Stock ETF ($800 million). Rounding out the top three was BlackRock’s iShares Barclays 1-3 Year Treasury Bond ($700 million).   

UIT ETFs drew a net $2.2 billion over the month, with SSgA’s S&P 500 SPDR recording a net intake of $1.7 billion, and the S&P 500 MidCap SPDR drawing half a billion dollars as well. PowerShares QQQ had only small net inflows ($100 million), while the other funds in the space each had little flow activity on a net basis.   

Flows into non-investment company structure ETFs totaled about $2 billion, and were dominated by the SPDR Gold Shares ($2.3 billion), as investors continued to use it to seek refuge from market volatility, SI said.   

Open-end ETFs of all types have accounted for just about a fifth of the total year-to-date long-term fund flows.