The Markets July 13, 2011

Mutual Funds Saw First Outflows Since Dec. 2010

Long-term mutual fund flows turned negative in June for the first time since December 2010, Morningstar reports.

Reported by

June saw outflows of $4.5 billion, after May had inflows of $22.6 billion. Risk-aversion was clearly visible as investors pulled about $18.0 billion from U.S.-stock funds in June, marking the worst monthly outflow for the asset class since the peak of the credit crisis in October 2008, as well as a net $6.3 billion from high-yield funds.

Other key findings of the report include:

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Investors redeemed about $41.4 billion from money market funds in June, the greatest monthly outflow for these funds since January.
In June, the gap between active and passive flows grew to nearly $20 billion, the greatest it has been since May 2009. Actively managed U.S.-stock funds accounted for all of June’s outflows, while passively managed offerings saw inflows of nearly $1.1 billion.
While international-stock funds, with outflows of $1.3 billion in June, did not suffer as much as their U.S. counterparts, several categories within the asset class took a beating. World-stock funds have seen outflows in 23 of the past 24 months.
Flows into taxable-bond funds fell to $11.9 billion from about $20.8 billion in May, with most of these redemptions coming from high-yield offerings. Municipal-bond funds registered inflows of nearly $1 billion in June.