Equity funds experienced net outflows of $13.8 billion in June, according to estimates reported today by Lipper of New York. That represents the third largest outflow ever and the first month of outflows since September 2001.

Furthermore, the $45.8 billion in net outflows from all mutual funds appears to be a record high, Lipper reported.

"Open-ended uncertainties about corporate financials’ credibility, potential major bankruptcies and international developments were a heavy burden for equity fund investors in June," said Donald Cassidy, a senior research analyst at Lipper. "Overlay on that the grinding disappointments and losses of a 27-month bear market, and many found it too much to bear."

Conversely, bond funds experienced $18.0 billion in inflows in June, the most in one month, Lipper said. June is typically a weak month for money-market fund flows, and this year was no different. Money funds had a net outflow of $50 billion, driven primarily by their low interest rates, especially compared to short- and intermediate-term bond funds, according to Lipper.

"Investors’ rising intolerance for equity-market losses and the low level of return available on money-market choices combined to move money towards bond funds in June," Cassidy said. "People wanted safety, and current cash return was a big attraction."

Of the $13.8 billion that flowed out of equity funds, $12.7 billion came from U.S. diversified funds, according to Lipper. Among those, large-cap growth funds were hit hardest, with $3.6 billion in net outflows.

Of the $18 billion of bond fund inflows, $15.2 came in short- and intermediate-term funds, according to Lipper. For money funds, 93% of the outflow came from institutional funds.

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