Lipper: Markets Still Driven by Caution

September 21, 2004 (PLANSPONSOR.com) - Investors kept the feet resting on the brake pedal during August with only moderate inflows into mixed equity and taxable bond funds.

Equity funds pulled ahead by $11.5 billion in August with core and value funds racing ahead of growth fund offerings, according to an analysis by Lipper Inc. Factoring in money market funds’ $8 billion outflow, funds overall finished the month with a total $6.3 billion inflow.

“Investor sentiment seems to be taking a wait and see attitude as the vacillating equity market and the seesawing presidential election dominates investor concerns,” Lipper researchers wrote. “Add to that the uncertainties aroundIraq and what appears to be a U.S. economy that took a pause during the summer month and you have a case for investor sentiment that is looking more to avoid losses than necessarily seek out gains.”

In the equity arena, Lipper said investors’ affinity for value over growth and mixed equity/fixed income funds mirrored the overall market’s cautious approach. Domestic diversified funds were the top performers, enjoying a $5.7-million inflow while world equity funds had a $2 billion August increase.

Examining equity performance by size and style, Lipper said value offerings were ahead $2.1 billion in August, compared to a $1.4 billion increase for growth funds. At the same time, multi-cap funds were ahead by $2.5 billion in August, followed by a $1.9 billion hike for mid-cap funds.

The fixed income space saw a $2.9 billion increase for short and intermediate term funds while long bond funds were ahead by a tick. Lipper said corporate bond funds raced ahead of both Treasury and government funds with a $1.3 billion asset advance. “We do not thing the new inflow into bonds in August signals a lightening of risk aversion on the part of investors,” Lipper wrote. “Instead we think bonds are benefiting from a lackluster stock market and investors are doing what they typically do when the stock market meanders – they’re putting money in bond funds.”

The full report is available    here .

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