Funds Bleed $10.8B in December

According to the monthly Lipper fund flow report, equities were the only asset type enjoying a December increase, as investors directed $15.5 billion into stock funds – the lowest since May.    Lipper said the comparatively low total reflects “a seasonal lull,” despite the market’s turnaround in late 2003. The December total was low compared to November’s $22-billion inflow (See Lipper: Investors’ November Equity Moves “Bullish”).

The big winner in the equity arena wasUS diversified funds, gaining $6 billion for the month.   Among US diversified equity funds, large caps were the only losers, giving back $2.8 billion for the month, while multi-cap offerings advanced $6.2 billion and mid-caps by $2.4 billion. Value oriented funds were ahead by $4 billion, core by $3 billion, and growth lost $1 billion.

Mixed equity funds turned in a $4.8 billion advance, while World Equity was ahead $4.3 billion.   Of the World Equity showing, International offerings took in more than 60%, with Japanese and Pacific Region funds suffering an outflow. Lipper noted that exchange-traded funds pulled in nearly $14 billion in December – a strong performance.

In addition to the equity inflow, fixed income gave back $5.1 billion, while money market funds saw $21.2 billion flee to the exits during December.

Lipper said bond funds suffered a total $50 billion outflow in last half of 2003, after a first half inflow of about $70 billion. Long-term bonds gave back $900 million in December, while short- and intermediate-term funds lost $4.2 billion during the period.

Lipper said fund inflows should be stronger in 2004. “Much has been written elsewhere on the need for the industry to repair its image, and that will take time even as some dramatic new statutory and regulatory changes are put into place in 2004,” the Lipper researchers wrote. “Despite the unbecoming behavior of some, the industry saw a revival of net inflows into equity fund in the year now ended. We presume the bull market will continue in 2004, absent some major negative international news, and that flows may therefore be even stronger in the New Year. The dominant overall pattern in December was toward broadly diversified fund types rather than rifle-shot choices, even while specific regions showed spectacular performance,” Lipper asserted.