U.S. Mutual Fund Flows Show Continued Investor Optimism

March 10, 2011 (PLANSPONSOR.com) – U.S. mutual fund net inflows in February demonstrated continued optimism among U.S. investors despite uncertainty in the Middle East and North Africa and general worries over inflation, according to Strategic Insight, an Asset International company.

U.S. mutual fund investors continued to flock to equities and bonds, adding about $29 billion in net new cash to U.S. stock and bond mutual funds in February 2011. An estimated $15 billion in net new cash went into U.S. equity funds in February 2011, which was down from the $21 billion in equity fund inflows in January, SI data showed. However, the total represents the best start to a year since January-February of 2007, when U.S. investors put a total of $25 billion into domestic stock funds.  

Flows into international and global equity funds dropped to roughly $6 billion in February from $12 billion in January – a relatively positive sign given that February was marked by the tumultuous end of Egyptian President Hosni Mubarak’s reign on February 11 and the start of a mass uprising in Libya on February 17, SI said.  

Taxable bond fund flows continued their positive streak in February, drawing $13 billion in net new flows, led by Global Bond, High-Yield, and Floating Rate funds. The search for yield buoyed bond fund demand, although at a slower pace that seen in 2010.   

“We see 2011 as a year for ongoing demand for selected bond mutual fund strategies,” said Avi Nachmany, SI’s Director of Research, in a press release. “Until global inflation and repeated hikes in U.S. interest rates impact fund shareholder behavior, investors’ appetite for income in a period of near-zero yields on money fund and bank deposit accounts remains insatiable.”   

Money-market funds saw net inflows of $13 billion in February. This followed net outflows of $77 billion in January, and was the first month of positive net new flows since November’s $25 billion in net inflows.   

More about Strategic Insight is at http://www.sionline.com.