However, according to a Lipper monthly mutual fund flows report, mutual fund assets overall still retreated by $9.1 billion in October – an improvement over September’s $31.2 billion giveback (See Lipper: Four Scandal-Linked Fund Firms Lost $8B in September). With fixed income funds in the red by $3.1 billion and money market offerings giving up a whopping $29.8 billion.
Lipper’s analysis showed that, despite the continuing state and federal probe into mutual fund market timing and late trading, investors showered equity funds with $23.8 billion in October – second only to the $26 billion equity offerings enjoyed in August. “Apparently, in investors’ minds, October’s fairly sharp market gains swamped the management trust issues” raised during the investigation, Lipper commented.
In the equity arena, domestic diversified funds were the clear October winner with a $13 billion inflow while world equity had a $5.4 billion inflow and mixed equity a $5.3 billion asset gain. Lipper researchers said the month was marked by investor performance chasing – particularly with the large world equity inflows. Sector funds in general enjoyed a nearly $900 million inflow in October with particularly strong showings by real estate and science and technology funds.
Of the assets poured into domestic diversified funds, Lipper said the character of the investment choices remained somewhat cautious, with value funds walking off with $5.9 billion or 45% of the total, while growth funds captured $2.7 billion or 21%. Multi-cap funds were the big winner in terms of size with a $7.6 billion gain, while mid-caps captured a $3.6 billion increase and small caps a $2.7 billion advance over the month.
In the world of fixed income, the $3.1-billion October outflow was the smallest monthly deficit since interest rates bottomed out in June, according to Lipper researchers. Despite the outflow, Lipper said fixed income fund investors still went in for some aggressive plays including $1.1 billion flowing into high yield funds. Muni bond funds lost $1.1 billion in October, Lipper said. Taxable bond funds lost $2 billion.