Mutual Fund Flows Show Continued Optimism

U.S. mutual fund investors continued to flock to equities and bonds, adding about $29 billion in net new cash to U.S. stock and bond mutual funds in February 2011. An estimated $15 billion in net new cash went into U.S. equity funds in February 2011, which was down from the $21 billion in equity fund inflows in January, SI data showed. However, the total represents the best start to a year since January-February of 2007, when U.S. investors put a total of $25 billion into domestic stock funds.  

Flows into international and global equity funds dropped to roughly $6 billion in February from $12 billion in January – a relatively positive sign given that February was marked by the tumultuous end of Egyptian President Hosni Mubarak’s reign on February 11 and the start of a mass uprising in Libya on February 17, SI said.  

Taxable bond fund flows continued their positive streak in February, drawing $13 billion in net new flows, led by Global Bond, High-Yield, and Floating Rate funds. The search for yield buoyed bond fund demand, although at a slower pace that seen in 2010.   

“We see 2011 as a year for ongoing demand for selected bond mutual fund strategies,” said Avi Nachmany, SI’s Director of Research, in a press release. “Until global inflation and repeated hikes in U.S. interest rates impact fund shareholder behavior, investors’ appetite for income in a period of near-zero yields on money fund and bank deposit accounts remains insatiable.”   

Money-market funds saw net inflows of $13 billion in February. This followed net outflows of $77 billion in January, and was the first month of positive net new flows since November’s $25 billion in net inflows.