Bond Funds Continue to Gain, Equity Gives Back Again

October 18, 2002 ( - Investors continued to take money out of stock mutual funds in September, with bond mutual funds poised to break the record for inflows.

According to mutual fund research firm Lipper Inc., investors dumped $10.5 billion in stock funds – the fourth consecutive month of net outflows.  

The usual favorite of fund holders, large-cap funds, saw their 21 st straight month of outflows at $8 billion.   Meanwhile, 2002 favorites, small- and medium cap funds each saw runoff of $1 billion.   A bright spot could be found in world equity funds, recording a second consecutive month of inflows, netting $1.2 billion. Sector funds, meanwhile, gave back about $2.2 billion, Lipper said.

The money continues to flow into bond funds. For September, the inflow of money into bond fund exceeded the outflow of money out of equity funds.   This suggests an infusion of new money into the bond market.   With the new inflows, bond funds have now exceeded $100 billion for the year and look to exceed the record of $120 billion, set in 1986.  

More than 90% of the new inflow into bond funds, $13 billion, went into the short- and intermediate-term funds, as investors were timid about low interest rates.   However, long-term funds still saw a new inflow of $1.2 billion.  

Institutional equity funds net inflows of $250 million played a small part in August’s overall equity fund flow picture.