Investing June 19, 2002

Investors Cautious in May

June 19, 2002 (PLANSPONSOR.com) - 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.
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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.

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