Bond Funds See Record Inflows in 2009

Strategic Insight (SI), an Asset International company, announced that full-year 2009 inflows to bond funds (including traditional mutual funds and ETFs) hit an all-time record of $396 billion—an impressive number considering bond and stock fund flows have never before topped $300 billion in one year. If funds underlying variable annuities are included, bond fund inflows hit $425 billion in 2009, according to SI.

Stock fund flows, when excluding emerging markets, were only around $30 billion, which SI said demonstrated that while spiking stock prices worldwide are signaling economic recovery, investors in stock mutual funds remain cautious and ambivalent about the recovery. Emerging markets funds (diversified or single country) captured about $55 billion during 2009.

Altogether, long-term mutual funds (stock and bond funds and ETFs) saw total net inflows of $478 billion in 2009, led by taxable bond funds (net inflows of $324 billion) and international equity funds (net inflows of $75 billion). SI said a limited appetite for risk restrained demand for U.S. equity funds in 2009, resulting in net inflows of just $6 billion.

ETFs (including ETNs) saw net inflows of $114 billion in 2009, down from $176 billion in 2008, but more than twice that of traditional index fund flows, at $54 billion, up from $50 billion in 2008.

The average investor in stock funds earned a 33.6% return in 2009, while the average bond fund investor earned 16.9%. According to SI, those figures are asset-weighted, thus reflecting the experience of the average investor, not the “average fund.”

Stock and bond mutual funds (including ETFs but excluding variable annuity funds) ended the year with $7.8 trillion in assets.