Weak Equity, Bond Markets Produce Q108 Declines

August 18, 2008 (PLANSPONSOR.com) - Mutual fund assets worldwide decreased 5.1% to $24.81 trillion at the end of the first quarter of 2008, the first quarterly decline in nearly four years, according to Investment Company Institute (ICI) data.

According to an ICI news release, the decline was due in part to weakness in equity and bond markets worldwide and in part to non-reporting by one country.

Net cash flow to all funds increased to $394 billion in the first quarter, up from $382 billion in the fourth quarter of 2007. Long-term funds experienced net outflows of $93 billion in the first quarter, compared to a net inflow of $131 billion in the fourth quarter.

Bond fund net flows actually strengthened, with a net inflow of $13 billion worldwide in the first quarter compared to a net outflow of $29 billion in the fourth quarter.

This was more than offset by weakened net flows for equity funds and balanced/mixed funds, which combined, had an outflow of $147 billion in the first quarter compared to an inflow of $126 in the fourth quarter. Inflows to money market funds increased substantially, with $487 billion in inflows in the first quarter of 2008 compared to $250 billion in the fourth quarter of 2007.

class=”normal-1″> Hong Kong did not report data for the first quarter of 2008, with $818 billion in assets in the fourth quarter of 2007; the absence of Hong Kong data accounted for 61% of the decline in worldwide mutual fund assets in 2008 first quarter.

class=”normal-1″> On a U.S.-dollar-denominated basis, long-term fund assets decreased but money market fund assets increased. Assets of equity funds fell 14.8%, with $10.6 trillion in assets at the end of the first quarter of 2008. Balanced/mixed fund assets declined 5.2% and bond fund assets declined 1.3% in the quarter. Assets of money market funds increased 13.2% to $5.6 trillion at the end of the first quarter.

class="normal-1"> Net cash flow into mutual funds worldwide was $394 billion in the first quarter of 2008, with net inflows to money market funds more than offsetting the net outflows from long-term funds. Net outflows from equity funds worldwide were $132 billion in the first quarter, compared to a net inflow of $84 billion in the fourth quarter of 2007.

class="normal-1"> The Americas registered a net outflow of $47 billion from equity funds in the first quarter, compared to a net inflow of $64 billion in the fourth quarter. The pace of net outflows from European equity funds quickened in the first quarter, with $115 billion in outflows, compared with $37 billion in the fourth quarter.

class="normal-1"> Flows to equity funds in the Asia/Pacific region slowed but remained positive, dropping to $31 billion in the first quarter compared to $57 billion in the fourth quarter.

class="normal-1"> Bond funds experienced $13 billion in net inflows in the first quarter of 2008, compared to net outflows of $30 billion in the fourth quarter of 2007. Net inflows to bond funds were $79 billion in the Americas in the first quarter, up from $21 billion in the fourth quarter. Net outflows from bond funds were $59 billion in Europe in the first quarter, compared to net outflows of $47 billion in the fourth quarter.

class="normal-1"> For the first time since the first quarter of 2003, worldwide flows into balanced/mixed funds were negative in the first quarter of 2008, with $15 billion in net outflows compared to net inflows of $42 billion in the fourth quarter of 2007. Net flows into balanced/mixed funds in the United States slackened but remained positive, falling to a $5 billion pace in the first quarter from an $11 billion pace in the fourth quarter.

class="normal-1"> A full report is available  here .

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