What Do Fund Flows Have To Say?
According to the latest mutual
fund flow data,
last week, money market and bond mutual funds witnessed a dramatic pullback
in allocations, while equity funds saw an increase, albeit a small
one. Although this recent reversal in allocations does
not necessarily mean that a new trend is developing, it certainly confirms that
momentum of the risk-aversion trend is slowing down.
During this time period, a total of $8.16 billion came out money market
funds. Interestingly enough, institutional investors were solely responsible for
this outflow, as they redeemed $10.6 billion, while retail investors allocated
$2.44 billion to cash funds–remember, the little guy (collectively) is usually
the last to catch any move in the markets.
Taxable and municipal bond funds saw retail inflows decrease to $500 million
during this time period, even as bond prices were punished last week.
Equity mutual funds saw a modest retail of $2.1 billion in retail money last
week; however, 85% of the allocation went to funds that invest in foreign equity
markets, which have been punished more severely than those in the US. The
remaining 15% went into US technology and real estate oriented funds.
This year, investors have sold $15.2 billion in equity funds, $13.6 billion
in money market funds and purchased 29.1 billion in bond funds.