The US mutual fund industry recorded impressive net inflows in 2012 raking in more than $243 billion, according to Morningstar. US Stock classified funds recorded a whopping $119 billion outflow for the year while bond categories were positive, including a net $262 billion inflow. This trend has been in place since 2007-2008, during which time the assets in taxable bond category have swelled from $1.1 trillion to $2.5 trillion. Despite the nasty outflow trend in US stock funds, this category still claims $3.4 trillion of assets. All long-term funds, excluding money market, sum to nearly $9.3.It will be interesting to watch if the long-term trend of flows into bonds and out of US Large Cap stock categories continues. Bond yields in general are very low and many pundits do not believe there is much room for further price increases. Stocks relative to bonds appear to be better bargains according to some measures such as the S&P 500 earnings yield minus the yield on 10-year US Treasuries. Somewhat surprising recently was the reporting of positive flows into stock funds for the first couple of weeks in January, according to Lipper. This news created a little excitement to market followers, especially those more reliant on equities to earn a living.
So we will stay tuned to fund flows to see if this development is the beginning of a change in trends or merely a blip in the longer-term theme of bond category domination.
The remarks and observations stated here represent the views and opinions of Fund Architects, LLC, and are not intended to be construed as investment advice. Fund Architects is not responsible for any actions taken as a result of these comments. No form of compensation is received for the contents of this blog.