Equity Funds Finally Get Some Attention

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.

Target-date funds are contributing a meaningful percentage of total flows at many shops. For example, such funds accounted for over half of Fidelity's flows and almost 40% of T. Rowe Price's flows over the past 12 months. They also accounted for more than a third of flows at Wells Fargo Funds, TIAA-CREF, ING, and Principal. (For more on target-date funds, see Morningstar's  Target-Date Fund Series Reports.)

Investors Notice REIT Fund Returns
REIT funds have been getting some attention from investors lately, and performance seems to be motivating those flows; the sector has been on a tear lately. Real estate has been a stellar performer lately, gaining almost 67% over the trailing 12 months ended April 30. The global real estate category has also notched impressive gains of almost 50% over that time span.

Those results have undoubtedly gotten investors' attention, and flows into both categories have picked up steam. So far this year, the real estate category has gathered $1.5 billion in assets, which is its best start since 2007. That's quite a comeback from 2009, when the category took in just $199 million for the full year. Flows into global real estate funds haven't been quite as robust, but the category has still raked in $517 million so far in 2010, more than offsetting the $137 million in outflows it saw in 2009.

 Vanguard REIT Index (VGSIX) has been the most popular domestic real estate fund, with $325 million in inflows so far this year. Close on its heels is  First American Real Estate Securities (FREAX), one of the category's top performers. It has taken in $310 million so far this year, which is almost 100% of its total net assets at the beginning of the year-ago period. ING Global Real Estate  is the flows leader in the global real estate category with inflows of $267 million so far this year.

Given the category's strong rally and less attractive REIT valuations, these performance-chasers may be late to the party.

Bank-Loan Funds Get More Fans
The small bank-loan category has also gained favor with investors in recent months. The category notched inflows of $2.1 billion in April for its best month ever by far. So far in 2010, $5.5 billion has flowed into the category. That's more than it gathered in all of 2009.

There are probably a couple of factors driving the demand for these funds. First, bank-loan funds have put up impressive returns, gaining almost 29% over the past 12 months through April. Second, with interest rates at multigenerational lows, investors are likely trying to prepare their portfolios for rising yields.

 Fidelity Advisor Floating Rate High Income (FFRAX), one of the more restrained funds in the category, tops the flows list with $1.4 billion in inflows so far this year. Other popular funds include Lord Abbett Floating Rate (LFRAX), Hartford Floating Rate (HFLAX), and  Eaton Vance Floating Rate  (EVBLX), which captured year-to-date flows of $1.1 billion, $997 million, and $772 million, respectively.

Fund Flows Don't Register Gulf Disaster � Yet
Although the disaster in the offshore rig in the Gulf of Mexico took a toll on oil stocks, those results haven't yet impacted flows into energy funds. Flows were modestly positive in April, but it's likely too soon for fund investors to react to the news.

Meanwhile, the broader natural resources category took in $405 million in April and $1.3 billion so far in 2010. That's almost two times as much as they took in at this time last year.

Open-End Fund Family Highlights
Vanguard gathered the most mutual fund assets in April with $8.6 billion. The firm also registered impressive ETF flows as well. Still, year-to-date flows of $32.9 billion are down 6% from the year-ago period.

In spite of record flows into bond funds, American Funds' fixed-income suite has continued to lose assets. Its taxable bond funds have had outflows of $1.4 billion year-to-date through April. Overall, the firm had net redemptions of $2.6 billion in April--its 10th straight monthly outflow. Outflows over the past 12 months total $21.5 billion.

Brandywine has also been steadily leaking assets. The firm has registered outflows in every month since December 2008. Since then, the firm's total net assets have declined from $5.4 billion to $4.7 billion at the end of April. The firm's two flagship funds,  Brandywine Fund (BRWIX) and  Brandywine Blue  (BLUEX), struggled in the bear market and have also lagged during the rebound.

Hotchkis and Wiley registered its second consecutive month of inflows when it gathered $77 million in April. That's notable because the firm had been in steady monthly redemptions from mid-2007 through February 2010. Inflows have started to tick up at some of the firm's equity offerings, which had a rough 2008. However, the main boost in flows has come from the shop's newest fund,  Hotchkis and Wiley High Yield  (HWHAX), which is run by two skillful former PIMCO veterans, Ray Kennedy and Mark Hudoff. That fund has taken in $74 million since its April 2009 launch.

Matthews Asia Funds has been on a roll, collecting over $1 billion so far in 2010 and $3.3 billion in 2009. The firm has seen its total net assets double over the last 12 months.  Pacific Tiger (MAPTX) and  Asian Growth & Income (MACSX) have been the top asset gathers over that period, taking in $1.4 billion and $1 billion, respectively. More recently, investors have grown fond of the  Asia Dividend Fund  (MAPIX), which has gathered $418 million so far in 2010. (Click to see Morningstar's recent video interview with Matthews Asia Dividend manager Jesper Madsen.)

Unlike most other firms, Osterweis saw inflows in 2008, and investors have continued to pile into the firm's funds since then. Given the popularity of bond funds, the  Osterweis Strategic Bond Fund (OSTIX) has seen the most in inflows, with $349 million through April. (Click to see Morningstar's recent Q&A with Strategic Income manager Carl Kaufman). Still, the  Osterweis Fund (OSTFX) has seen impressive growth as well, with inflows of $111 million year to date. The firm's total net assets have grown from $769 million in April 2009 to $2.0 billion at the end of April 2010, a 165% increase.