In fact, analysts preparing the monthly Lipper mutual fund flows report found that investors’ buying patterns in November “indicates a notable rise in bullishness.” Investors poured $22 billion into the stock market during the month, down only slightly from October’s nearly $24 billion equity totals. (See Equity Funds Shine in October Despite Scandal ).
Investors are increasingly turning to technology and world equity offerings and, more and more, shying away from the always-safe diversified domestic equity portfolios, Lipper said, which had a comparatively small $9 billion November inflow – the smallest since May.
“The major forces at work were three: the length, strength, and persistence of the present bull market rally; fund investors’ general loyalty to the investment vehicle despite reports of scattered wrongdoing; and an increasing willingness to speculate in more aggressive fund types,” the Lipper researchers wrote.
For mutual funds overall, November saw a $16.5-billion asset advance, the first positive net inflow since July and a significant improvement over October’s $9.1-billion retreat and September’s $31.2 billion giveback. In November, fixed income funds were in the red by $2 billion and money market offerings gave up $3.5 billion.
In the equity area, world equity had a $4.4 billion inflow and mixed equity a $5.1 billion asset gain. Sector funds in general enjoyed a $2.2 billion November gain on the back of strong showings by both the Science and Technology and Gold funds.
Lipper blamed the comparatively small investor endorsement of domestic diversified funds on the trading scandal and the lagging performance of large-cap funds. In fact, Lipper said large caps suffered a net $3.7-billion asset runoff over the month – a trend Lipper said significantly driven by skittish investors with some of the scandal-tainted fund companies flocking to the exits in steady numbers. Elsewhere in domestic diversifieds, multi-cap funds turned in a strong November performance with $6.4 billion in inflows.
In the world of fixed income, the November outflow included a $1.1 billion giveback in the long end of the market and a $900 million loss from short-term and intermediate funds. “It appears that these kinds of funds (short-term and intermediate) were a parking place for money during the more frightening part of the equity bear market – a role normally played by money funds, but one they lost this time due to extremely low rates,” Lipper wrote. “Such money seems to be continuing to trickle back to equity funds and perhaps to individual stock as well.”