Mutual Fund Investors Stand Still in July, Lipper Report Says

August 23, 2004 (PLANSPONSOR.com) - Mutual fund investors laid low in July, refusing to move money in any substantial way, thus generating very small net flows results, according to a Lipper FundFlows Insight Report.
By PS

“Stocks and consumer confidence declined while oil prices, inflation concerns, terror sensitivity, and election uncertainty rose,’ said Don Cassidy, a senior research analyst at Lipper Inc., in the report. “In that context, investors’ inaction was quite understandable.”

Equity funds, broadly defined to include both stock funds and Mixed-Equity or ‘hybrid’ funds, enjoyed an inflow of only $8 billion, 1/3 of June’s inflow pace (see Lipper: Equity Funds See Inflows in June ). The Lipper report suggested that this may be a signal of a fundamental paradigm shift in investor thinking. Investors, the report stated, while at some level understanding of the need for asset acquisition in the long run, are apparently unwilling to take more than minimal perceived risk in the short term. The Lipper report suggests that this trend may continue for “some more months.”

Fixed income funds, on the other hand, saw an outflow of $1.5 billion. However, this is the best net-flows month since March. Lipper attributes this mitigation of net outflow to an upturn in bond prices as well as a broad disaffection with stocks and stock funds.

Money markets saw their third-best net-flow results in the last 12 months, with only $8.4 billion in outflow seen for the month of July. There was, according to the Lipper study, an even split between institutional and retail classes. “About all that can currently be said with some assurance is that the pressure on money fund balances coming as a result of low interest rates has abated,” the report stated. “Those who were inclined to move elsewhere presumably have largely done so.”

The Lipper report concluded that although returns were slightly negative for the month of July, activity was light and net flow in specific fund types was small by historical standards.

– Kip McDaniel

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