Investor Appetite for Mutual Funds Swells in August

October 3, 2006 ( - Investors' affinity for mutual funds gained steam in August, with stock and bond funds showing $12 billion in net inflows - an impressive leap from the $7 billion inflows of July.

According to monthly data from the Financial Research Corporation (FRC), the thirst for mutual funds has rebounded from a low $2.7 billion in June, which followed $5.3 billion in inflows in May (See Fund Flows Reverse Course in June ).

International/global funds stayed in the lead with net inflows of $10.1 billion, up from the $7.3 billion it posted the month before (See  Investor Attraction to Mutual Funds On Again in July ). Corporate fixed income funds also kept their second place spot with a $4.7 billion in net intake, up from $2.5 billion the month before. Tax-free funds, again in the third spot, emerged from the million dollar inflows of July, with inflows of $1.4 billion in August.

Domestic equity funds fell back $2.7 billion and government bonds retreated by $1.8 billion, according to FRC.

By Morningstar category, large value funds outperformed all other asset categories in August, with $3.39 billion in net inflows, followed by intermediate term bond funds ($2.6 billion), foreign large blend funds ($2.3 billion), world allocation funds ($2.1 billion) and foreign large value funds ($1.8 billion).

American Funds moved up from its second place spot in July into first place among the fund groups, with $5.2 billion in net inflows for the month of August. Barclays Global Investors funds dropped to second with $2.7 billion in inflows, and Vanguard came in third with $1.8 billion. Dodge and Cox held the fourth spot for best selling funds, with $1.5 billion in inflows, followed by Dimensional Fund Advisors, with $862 million.

American Funds also had the top three selling funds for the month of August: American Funds Capital Income Builder ($1.4 billion in inflows),  American Funds Growth Fund of America ($1.2 billion) and American Funds Capital World Growth and Income ($1.1 billion).