Strategic: Equity and Balanced Funds Record $20-Billion Inflow in May

June 19, 2003 ( - Inflows to equity and balanced funds exceeded $20 billion in May, the second month in a row of strong stock market demand.

May was also another good month to bond fund inflows, which recorded roughly $13 billion in new assets.   For the entire second quarter equity fund inflows could reach near $60 billion, with over $35 billion in bond fund inflows during the quarter, according to data from Strategic Insight.

Further NAV gains and inflows during June propelled the US mutual fund industry assets to $7.3 trillion, an increase of $600 billion since the beginning of 2003 and to a level near its high in early 2000.   Strategic points to these results and forecasts that if buying trends of funds continue, cash inflows to actively managed stock and bond funds would exceed $200 billion for 2003, elevating this year’s cash flow results near 2000 high volume.

This recent spate of investor spending continues a trend of ongoing sales of bond and stock funds, and stable retention patterns.   In fact, two-thirds of stock and bond fund managers attracted positive cash inflows during 2002, with total stock and bond fund new sales rising 4% from 2001 to reach $1.4 trillion, a pace only 12% below their historical highs.   Strategic sees similar ratios in 2003.  

Additionally, bond funds, which reversed their outflows of 2000 and attracted $94 billion in 2001, have continued the winning ways, gaining an additional $161 billion last year; and over $85 billion in so far in 2003.

Strategic points to an increasing demand of bond or balanced funds, diversification needs, steady retirement flows, and a greater respect for mutual funds over individual securities, as some of the reasons driving fund demand lately.   For an industry that had largely become equity oriented throughout he bull market, the demand for and growth of lower fee bond funds throughout 2002 and into 2003 have been key developments due to bond funds controlling just one-third of new sales and equity/balanced funds contributed the other two-thirds.