Money Market Funds Bleed in April

While equity and fixed income mutual funds attracted new capital over the month, the inflow failed to offset the steady stream of assets exiting low-yielding money market funds over the month.

According to Lipper estimates:

• bond funds took in $7.6 billion in new money, slightly more than they did in March
• stock funds took in $14.9 billion, half the amount that flowed in the previous month
• balanced funds saw a $2.4 billion inflow, on par with the previous month
• money market funds saw outflows of over $25 billion.

Sector

Among equity funds, sector funds, which attract more aggressive investors, suffered a net outflow of about $1.4 billion over the month, as risk appetite decreased.

In April, within the sectors:

• Science & Technology funds, which posted losses of 12% over the month, had over $1.3 billion in estimated outflows
• Utility funds, negatively affected by their exposure to telephone holdings, saw about $300 million stream out
• Telecommunications funds lost 2.5% of their assets, or around $100 million
• Real Estate funds, which pay high dividend yields and have performed well in recent months due to their reputation as a safe haven, attracted $500 million – over 3% of assets.
• Gold funds, supported by a strong gold price and negative news flow added $150 million or over 5% of assets.

Style

US Diversified Equity funds, which are often included among 401(k) plan options as diversification strategies, saw a $10.5 billion inflow, which although large, was down almost 50% on the previous month’s inflow.

Within this area:

• value funds drew in $12.4 billion
• growth funds lost $5.3 billion.

In terms of size:

• large-cap funds saw outflows of $5.1 billion
• small-caps added a net $7.5 billion.

Fixed Income

Lipper data showed the prevailing recent pattern in fixed income continuing, with investors favoring short- and intermediate-term funds over longer-term types, as relative principal risk for the relative yields seemed more attractive in the current interest rate environment.

• long-term bond funds saw inflows of $0.9 billion
• short- and intermediate-term bonds funds attracted $6.7 billion

Bond-fund flows continue to benefit from caution about stocks and the rediscovered virtue of asset allocation as a risk-control measure, according to Lipper’s analysis.

Money Market

As usual, the tax calendar made April an outflow month for money market funds, with some $16.5 billion leaving taxable money funds and another $10 billion in net withdrawals occurring in tax-free money funds.