Investors holding
BOSTON – Most mutual fund investors appear to be heeding the advice of financial planners who typically urge clients to stick it out for the long run, even if their portfolios take a short-term hit when markets fall, according to a pair of reports Friday.
But as most hold onto their investments, mutual fund clients are seeking greater safety, by favoring money-market and bond funds rather than more volatile stock funds.
U.S. mutual funds saw a net inflow of $52 billion during July, as gains in flows to money-market and bond funds offset a net outflow to stock funds, according to the New York-based research firm Strategic Insight.
What’s more, Standard & Poor’s Ratings Service said money flowing into funds at most global asset managers during the second quarter largely offset the reduced value of their assets triggered by declining stock prices.
Asset managers whose credit S&P rates “continued to hang tough in the second quarter,” S&P said.
Worldwide, fund firms’ assets under management declined 3.6 percent from the first quarter to the second.
“Against market performance, the rated asset managers performed better than expected,” S&P said, noting the quarter saw unusually strong performances from such managers as BlackRock Inc., Janus Capital Group Inc. and Waddell & Reed Financial Inc.
Strategic Insight said investors added about $75 billion in July to money market funds seen as safe havens from recent volatility in stock and bond markets. And bond funds saw net inflow of about $4.5 billion last month, while investors pulled out about $27 billion from stock funds, not counting exchange-traded funds, Strategic Insight said.
The poor July result for stock funds followed inflows to that category in April, May, and June. All told, for the year’s first seven months, stock funds have seen a net outflow of $20 billion.
Strategic Insight said that amounts to about $3 pulled out for every $1,000 held in $7 trillion in stock funds industrywide – a relatively modest outflow, the firm said, considering the Standard & Poor’s 500 has fallen 13 percent through July.
The year-to-date outflow represents “quite a modest shift in allocation, and underscores investors’ commitment to long-term, buy-and-hold strategies,” Strategic Insight said.
Loren Fox, a research analyst for the firm, said the findings are in line with historic data showing mutual fund investors’ withdrawals. “What we have found is that when there is a downturn in the markets, it is not unusual for investors to pull money out of mutual funds,” said Fox, “but these redemption periods tend to be short-lived.”
And if the modest rebound in U.S. markets during early August continues, the trend “may slowly trigger improving flows for equity mutual funds in coming months,” said Strategic Insight’s research director, Avi Nachmany.