A sizable chunk of those assets went into bond funds, reflecting an ongoing search for yield.
U.S. investors poured $47.5 billion into mutual funds in March 2010, bringing total net inflows for the first quarter to $125.2 billion. Investors continued to favor bond funds over stock funds by a sizable margin, a trend that has now endured for an amazing 27 straight months.
Flows into U.S. stock funds turned positive in March, after registering outflows in February; however, inflows for the first quarter came to a rather anemic $1.6 billion in spite of the broad market rally.
Instead, mutual fund investors preferred foreign markets. International stock funds collected $19.7 billion for the quarter, the asset class's strongest quarterly inflow since the fourth quarter of 2007.
Investors also pulled $148.2 billion out of money market funds in March. In the first quarter alone, $324.4 billion exited money markets, the largest quarterly outflow since we've been keeping records.
Money market inflows soared in the fall of 2008 after the government agreed to backstop them and as equity and bond markets were imploding. Assets in money markets held steady at around $3.5 trillion in total assets throughout the first half of 2009, but cash began to flow out once the stock and bond markets began their strong rebound. Over the past 12 months, outflows totaled $739.6 billion, and assets had come down to $2.9 trillion at the end of March. Nevertheless, assets in money markets are still well above the levels seen before the financial crisis. For comparison, total assets in money market funds ranged between $1.2 and $2.0 trillion during the first six years of this decade.
A sizeable chunk of those assets went into bond funds. Fixed-income funds gathered $88.5 billion in the first quarter of 2010 and $396.1 billion over the past 12 months. As we've discussed in past commentaries, bonds have dominated flows for several months running.