Equity fund flows slowed to $9.9 billion in April, half of March's pace, marking the third month in a row they have declined 50% or more from their previous month's levels, Lipper reported.
In fact, April's net equity flows were only 80% of what they took in during January. Fixed income funds suffered net withdrawals of $9.2 billion, and money market funds also lost a net $45.3 billion, making for overall net withdrawals of $44.6 billion during the month.
"The flat-to-declining stock markets, both locally and globally, drove the smaller equity flows, while a sharp upturn in interest rate and inflation expectations in the bond markets drove bond fund flows into negative territory," according to Lipper's monthly fund flows report.
Lipper attributed much of the net declines to weakening stock market performance, with the Nasdaq, Dow 30 and S&P 500 down 10.8%, 4.1% and 4.3%, respectively, at the end of April from their first-quarter highs. However, the fund research firm added that much of the "continued falloff in fund flows to U.S. diversified equity is part of the cautious behavior we've been [seeing] for several months now."
While the net decline in money market funds was sharp, it was not unexpected, as many investors withdraw money from these funds each April to pay taxes, Lipper noted.
Among equity funds, the most popular were mixed funds, with these taking in $6.7 billion in the month. U.S. diversified funds took in $2.2 billion, although this was down a significant 66%, or $4.3 billion, from March. Here, again, mixed investing was the name of the game, for among large-, mid-, small- and multi-cap funds, investors' favorite choice was multi-cap, with $5.1 billion net flows going to this category.
Among the different fund styles, value funds, taking in $3.9 billion, were clearly favored over growth funds, which lost $2.5 billion. Core funds were in the middle, reaping $1 billion.
Sector funds had a particularly rough month, losing $2.2 billion due to net outflows of $1.3 billion from science and technology funds and $900 million from real estate investment trusts (REITs). While expectations for an increase in interest rates loomed in April, Lipper analysts said they were surprised by the sharp withdrawals from REITs, given their relative insensitivity to interest rates. "Instead, we attribute the 14% fall in real estate fund prices [in the month] to the bursting of a bubble, albeit a small bubble, in the REIT market," Lipper analysts said. "This decline in prices we believe is a sign that the happier days of real estate funds have passed, but we do not see a major decline or liquidation in the offing."
Finally, flows into world equity funds slowed for the third month, taking in only $2.4 billion. Lipper attributed this waning interest to "current unsettled and volatile market environments."
Among fixed income funds, both long-term and short-term/intermediate municipal outflows, $7.4 billion and $1.9 billion, respectively, increased from March, indicating a general uneasiness with the capital markets.
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