Investors Continued Seeking Safety in September

Bond funds are projected to amass more than $300 billion in net inflows for the full year (open-end mutual funds, excluding exchange-traded funds and funds underlying variable annuities), exceeding the 2010 and 2011 pace, according to Strategic Insight, an Asset International company.

Investors in stock funds remained cautious despite stock markets double-digit returns so far in 2012. Equity fund shareholders are taking some of their recent profits “off the table,” as stock fund redemptions during September were at the highest monthly level this year, reaching $17 billion. In contrast, exchange-traded funds (ETFs) investing in stocks attracted $33 billion in September, their highest monthly take in four years.

Asset-allocation funds saw nearly $1 billion in net flows for September, bringing quarterly net intake to $3.8 billion. 

“Insatiable demand for income and a lingering, semi-permanent state of investment anxiety continue to drive the choices for most mutual fund investors,” said Avi Nachmany, SI’s director of research. “We anticipate investors’ preference to persist in the coming months, but that a slow rotation toward stock funds may emerge in 2012.”

Separately, SI reported, ETFs benefited from a $36 billion September intake, bringing total net inflows (including exchange-traded notes, ETNs) to nearly $130 billion for the first nine months of 2012, already exceeding the full-year gain in each of the past three years. About 60% of ETF assets and flows are now sourced from individual investors while 40% are held by institutional investors, according to SI research.