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August 21, 2013

Lipper U.S. FFIR Summary: Bond Funds Suffer Second Consecutive Month of Outflows, While Equity Funds Gather Assets for July

by Ed Moisson.

At the beginning of July investors cheered a better-than-expected nonfarm payrolls report that showed the economy adding 195,000 jobs for June, sending the market higher and tanking Treasury prices. But July wasn’t smooth sailing for equities. Interest-related issues came under fire on continued concerns of Federal Reserve “tapering,” and oil prices jumped after the military ousted Egypt’s president from office.

REUTERS/Amr Abdallah Dalsh

REUTERS/Amr Abdallah Dalsh

Mixed earnings and economic news put a cap on market returns toward month-end. Investors kept an eye on the global market, with a special focus on signs of China’s slowing factory output, Egypt’s growing unrest (and the impact on oil prices), and the Eurozone’s impressive preliminary PMI data. During the first half of the month Treasury prices remained on a roller-coaster ride, whipsawed by news and Fed-tapering concerns. After coming off highs mid-month Treasury yields softened a bit, but longer-dated issues still closed above their June month-end close.

For the twelfth month in 13 investors were net purchasers of fund assets, injecting a net $41.4 billion into the conventional funds business (excluding exchange-traded funds [ETFs]) for July. Mutual fund investors continued to shun fixed income funds, redeeming a net $10.1 billion from municipal bond funds—for their second largest monthly net outflow since December 2010—and $12.4 billion from taxable bond funds. However, once again investors embraced stock and mixed-asset funds, injecting $39.0 billion—for a seventh consecutive month of strong net inflows, while for the second month in three investors injected money into money market funds (+$24.9 billion net for July).

After witnessing for June their first net monthly outflows in 19, exchange-traded funds (ETFs) posted their largest monthly net inflows since September 2008, attracting $38.9 billion for July and pushing their year-to-date net inflows to $100.3 billion. Stock and mixed-equity ETFs, with net inflows of $34.6 billion for July, took in the lion’s share of net new money for the month. With Fed Chairman Ben Bernanke offering some calming remarks concerning Fed “tapering,” bond ETFs witnessed net inflows of $4.3 billion for July.

To read our complete July FundFlows Insight Report, please click here.

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