Investors are continuing to take money out of equity mutual funds, particularly domestic stock funds, but outflows are slowing compared with last year.
Baby boomers who are switching to bonds as they near or enter retirement are one reason for the outflows, according to Brian Reid, chief economist for the Investment Company Institute, which released the numbers. In addition, some investors are staying risk averse and switching to bond funds rather than returning to stock mutual funds, he says.
The amount of the outflow has decreased in recent months and even saw a small weekly inflow in mid-July. Many more monthly totals have been marked by outflows than inflows for equity funds since mid-2007. This year, each monthly total saw an outflow for domestic equities mutual funds including an outflow of $10.3 billion during July, the most recent month for which totals are available. However, ICI has reported weekly statistics for August that show outflows every week from domestic stock funds, while bond funds continued to gain.
From January through the end of July, $40 billion flowed out of equity funds, ICI said, while all of 2011 saw outflows from equity funds of $130 billion.
Meanwhile, the total assets in mutual funds increased 1.3%, or $161.5 billion, in July and now are at more than $12 trillion. Reid warned against reading too much into monthly fluctuations.
Stock fund flows in July posted an outflow of $10.3 billion compared with $6.17 in outflows for June. Among stock funds, world equity funds, U.S. funds that invest primarily overseas, posted an outflow of $707 million in July compared with an inflow of $2.79 billion in June. Funds that invest primarily in the United States had an outflow of $9.59 billion in July versus an outflow of $8.96 billion in June.
Hybrid funds posted an inflow of $4.7 billion in July, compared with an inflow of $516 million in June.
Bond funds have shown more consistent inflows for the past several years. Bond funds had an inflow of $24.62 billion in July, compared with an inflow of $16.29 in June. Taxable bond funds had an inflow of $19.22 billion in July, compared with an inflow of $12.34 in June. Municipal bonds funds had an inflow of $5.40 billion in July, compared to an inflow of $3.94 billion in June.