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February 1, 2013

Lipper Fund Flows: Equity Mutual Fund Flows Hit Levels Unseen in Nearly 12 Years

by Tom Roseen.

Equity mutual fund net inflows hit a four-week total of $20.7 billion, the largest recorded since April 12, 2000.

With only a single day left in the first month of the new year, investors continued to allocate funds to equity funds of all kinds, often at a rate not seen in years. Indeed, the net inflows of $20.7 billion into conventional mutual funds recorded over the four week period ended January 30 is the largest such period of inflows seen not only since the financial crisis of 2008, but since the previous economic crisis that began with the dotcom bubble bursting in the spring of 2000, according to data released late yesterday by Lipper.

Investors have been responding to gains in the broad stock market (the S&P recorded its first close about the 1,500 mark since late 2007 in January) and in stock funds specifically; Lipper says that equity funds had returned 4.68% for the month as of January 30 while month-to-date purchases of all kinds of funds hit $51.7 billion. Markets in turn are responding to signs of improvement in the global economy, and in particular to improvement in purchasing managers’ indices in China, the United States and the eurozone.

As of January 30, equity investors had invested a net total of $34.2 billion into both equity mutual funds and exchange-traded products for the month – the best performance recorded since January 1996, long before Alan Greenspan issued his famous warning about the dotcom economy suffering from ‘irrational exuberance’.

Meanwhile, for the week ended Jnauary 30, investors added a net $17.9 billion to mutual fund and ETF coffers. Equity funds, including ETFs, took in a whopping $12.7 billion for the week, marking their second largest weekly net inflows since September 14, 2011. Taxable bond funds and municipal debt funds also scooped up more assets during the week, announcing net inflows of $3.7 billion and $600 million. Money market funds saw inflows of just $900 million, as risk aversion took a back seat.

Within the equity fund universe, exchange-traded funds (ETFs) joined the party for the first time in the last three weeks during the just-ended period, pulling in some $6.9 billion in assets. SPDR S&P 500 ETF, after suffering three weeks of outflows, took in the largest net inflows among the ETF universe for the week, reporting $4.6 billion of inflows. Meanwhile, the Select Sector Energy SPDR and iShares: MSCI USA Minimum Volatility Index ETF followed behind, with inflows of $400 million and $300 million, respectively. Their conventional mutual fund brethren took in $5.8 billion, marking their fourth consecutive week of net inflows and bringing their four-week total to $20.7 billion, the the largest four-week total since the period ended April 12, 2000.

Not all the economic data was favorable, however. Despite strong durable goods orders and good earnings reports from a few bellwether stocks, there was news that pending home sales dipped and fourth-quarter GDP growth was less than anticipated. Nonetheless, investors remained in a risk-seeking mood, with former pariahs from last year, such as large-cap domestic mutual funds pulled in $1.5 billion for week, the biggest gain reported by any sector. That contrasts to the $104.9 billion that investors pulled out of this group during 2012. Among global and international funds, which attracted total inflows of $2.9 billion for the week, emerging markets funds pulled in $1.2 billion, the fourth week in a row in which inflows have topped $1 billion.

The willingness to embrace risk was also on display in the fixed income market, where $1.4 billion flowed into corporate investment-grade debt funds and another $800 million into flexible income funds, with taxable fixed income funds as a group attracting a total of $2.9 billion. Municipal debt funds (excluding ETFs) reported net inflows of $600 million.

For more information on this week’s fund flows data, please refer to Lipper’s database or this video.

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