American investors remain confused about this economic recovery, according to monthly data from Morningstar.
Investors are showing a measure of confidence as they slowly begin to reinvest. Morningstar said that mutual funds raked in net new assets of $30.3 billion last month and exchange-traded funds took in $4.6 billion. The U.S. ETF business was up 67.9% overall from a year earlier, according to Morningstar.
But Sonya Morris, an editorial director in the company's fund research group, warned against reading too much into the ETF inflows. "You can short ETFs, so even though we know assets into ETFs went up, we don't know precisely how much of that is someone being long or someone being short," she said.
Mutual fund investors have emphasized caution, pulling $3.7 billion from U.S. stock funds, which was the only major asset class to see outflows in February. It was the fifth month of outflows in the last six for the category. During the last 12 months, $21.3 billion has left the sector, Morningstar said.
Some of those dollars went into safer fixed-income funds, underlining mutual fund investors' worry regarding the economic recovery's stability. Taxable bond funds took in $19.8 billion in February, once again led by the Treasury's inflation-protected securities and short-term duration bonds.
The big story in bond funds lies in Pacific Investment Management Co.'s PIMCO Total Return Fund, which now makes up 27% of the world bond category, making it the largest mutual fund in the world, according to Morningstar.
Though the fund peaked last fall, Morris said it shows no sign of slowing down. It is twice the size of its two closest competitors — OppenheimerFunds' International Bond portfolio and American Funds' Capital World Bond portfolio — Morningstar said.
PIMCO’s Short-Term Bond Fund has also grown emphatically, gathering $6.1 billion in the last 12 months. With $10.6 billion of total net assets, the fund accounts for one-third of the assets in the ultra-short bond category, according to Morningstar.