Investors Cautious in May

June 19, 2002 ( - Risk aversion increased in May as mutual fund investors avoided low performing equities and moved to more defensive plays, according to estimates from Lipper Inc.

According to Lipper’s data, over the month purchases of equity funds shrank significantly, while net purchases of bond funds were up, and April’s outflow from money-funds reversed.

Equity Market

Estimated net inflows to equity mutual funds were down by roughly one third from April’s level, to $10.2 billion.

In May, investors continued to favor value over growth funds – the former style garnering $8.3 billion, the latter losing -$3.1 billion – and sought opportunity in foreign markets, which saw inflows of $2.6 billion at the expense of S&P Index Objective funds, where outflows reached -$900 million.

Sector funds reported outflows to the tune of $100 million overall, with Gold Oriented and Real Estate funds showing significant inflows, while Health/Biotechnology and Science & Technology funds, which continued to post performance losses, suffered significant outflows.

On a market capitalization basis:

  • large-cap funds saw a net outflow of about $4.8 billion
  • mid-cap funds drew $3.1 billion in new money
  • small-caps garnered $4.8 billion in inflows
  • multi-cap funds brought in $2.4 billion.

Fixed Income

According to Lipper’s figures, flows into bond funds improved slightly from the $7.6 billion inflow of April to an estimated $9.8 billion inflow in May, boosted by investors’ current disdain for the stock market.

Continued interest-rate concerns and inflation worries steered investors towards the short and intermediate-term bond funds.

  • short and intermediate bond funds saw inflows of $9.8 billion over the month
  • inflows and outflows to long term bond funds cancelled each other out

Adjustable Rate Mortgage funds and Government-bond funds enjoyed rising inflows, while corporate bond funds leaked significantly.

Lipper also reported outflows in.

  • Global Income funds
  • International Income funds
  • Emerging Markets Debt funds
  • High Yield funds

Money Market funds’ choppy short-term flow trends continued in May, attracting some $7 billion in new cash. Institutional share classes had inflows of about $15 billion, while retail share classes of money funds saw outflows of about $8 billion.