Bond Funds Take on New Luster

With the stock market so beaten down, investors are likely to continue to gravitate to bond funds, including those that invest in corporate bonds, The Wall Street Journal reports.

Marilyn Cohen, president of Envision Capital, said, “I think a lot of investors have just had it with the equity markets, listening to all these market gurus saying, ‘Oh, you got to be there when the equity markets turn around.’ They said that 1,000 Dow points ago. They have no credibility. The Baby Boomers are saying, ‘I’m too old to make up these losses. I’m not going to risk it.’”

So far this year, fixed income mutual funds have taken in net inflows of $15.5 billion, according to AMG Data Services, more than twice the $6.04 billion equity mutual funds have taken in. In the past year, equity mutual funds have lost $194.3 billion, whereas corporate bond funds have taken in $35.95 billion.

“The credit markets are the market, and the stock market is a sideshow,” said Sandy Rufenact of Three Peaks Capital Management.

Margie Patel, also a portfolio manager, with Evergreen Investments, agreed: “The debt markets seem pretty well understood, while the outlook for equities is still murky.”