In the week ahead of the stock market’s latest stumble, investors moved money out of mutual funds and into safer investments.
EPFR Global, a firm that tracks fund flows, reports that last week, fund flows out of equities totaled $9.27 billion in the week ending May 25. Outflows were seen for U.S., foreign developed and emerging equities funds.
According to the Cambridge-based research firm’s data, most of that money found its way into money market funds, which showed a net inflow of $7.94 billion, with another $4.53 billion flowing into bonds.
The only equity funds that showed cash inflows were Asian funds, excluding Japan.
It was the heaviest week of outflows for developed market equities since last August. It was also the third week in a row of outflows of cash from US equities -- the worst such negative run since the third quarter of 2010.
"A toxic combination of weak macroeconomic data, higher inflation in key markets and political posturing prompted investors to pull back from this asset class," EPFR Global wrote in its latest report.
Meanwhile, U.S. and developed market bonds had their best week since for inflows since last October, while emerging market bonds had their first week of net inflows in nine weeks. Investors favored local currency issues, an indication of concerns about US dollar inflation and also weakness in the Euro because of the European debt crisis in countries like Greece, Portugal and Spain.
Even U.S. municipal bonds, which had been receiving some bad press recently, benefited from the shift to bonds. While they were negative for the week, there were several back-to-back days of net inflows -- the first time that's happened since late last year. Municipal bonds experienced a total net outflow of $41.5 billion over the past 28-week period.
In another sign that investors are deeply concerned about inflation, commodity funds saw almost $5 billion in net inflows last week.