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Equity Funds Finally Get Some Attention

Investors pour $6.3 billion into stock mutual funds in April--the largest inflow since May 2009.

Sonya Morris, 05/18/2010

U.S. open-end mutual funds gathered almost $41 billion in assets during the month of April. On a year-to-date basis, inflows totaled $165.1 billion. That's well ahead of last year's pace, when funds took in $51 billion in the first four months of the year.

Money market funds continued to bleed assets. Investors pulled out $118.8 billion in April. Total outflows year-to-date for money markets come to $443 billion, which already surpasses the outflows for all of calendar year 2009.

U.S. stock funds finally got some attention from investors, who poured $6.3 billion into the asset class in April. That's the largest inflow into U.S. equity funds since May 2009. What's more, actively managed funds were the beneficiaries of $2.7 billion of that amount. April 2010 was the first month of positive flows into active domestic equity funds since May 2009. Still, these funds have experienced outflows in 16 of the 21 months since the credit crisis began.

Balanced funds also staged a respectable comeback, with inflows of $3.3 billion, its best monthly showing since February 2008.

Still, that pales in comparison to the $22.1 billion inflow registered by taxable bond funds. While taxable bond funds retained their dominant position, support waned for municipal bond funds, which had a rather lackluster month with inflows of $989 million. That's the poorest month for muni-bond funds since December 2008, when the asset class saw substantial outflows.

Target-Date Funds Maintain Consistent Inflows
Target-date funds have continued to steadily gather assets in 2010, with year-to-date inflows of $20.5 billion through April. That's 57% higher than the flows at this time last year. In total, target-date funds have amassed $291 billion in total net assets. If they were a single Morningstar category, they would rank as the seventh largest, falling between the foreign large-blend and world-stock categories.

Given their prominence in 401(k) platforms, target-date funds appear to be cycle resistant. The group saw inflows in 2008, in spite of disappointing performance and legislative scrutiny. That's helped them maintain fairly steady growth rates. Quarterly inflows as a percentage of beginning total net assets have generally ranged between 4% and 10% over the past three years.

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