Equity funds posted $8 billion in outflows for the month of August, the second worst month this year, as prolonged declines in stock prices put many fund investors in a state of unease, according to preliminary flow figures issued today by Lipper.

Within the equity category, world equity funds lost $6.5 billion, U.S. diversified funds lost $1.5 billion and domestic sector funds lost $1.2 billion. On the positive side, S&P 500 Index funds attracted $600 million while all other equity funds tracked by Lipper brought in $600 million.

Overall, funds attracted $31 billion in net new flows, down $11 billion from the same period last year, according to Lipper. Most of the flows went into money market and fixed income products. August is typically a strong month for money market funds and of the $24 billion that money market funds drew in August, $18.7 billion flowed into institutional funds.

Bond fund flows in August were up slightly from July, climbing to $15 billion. Long-term bond funds reported positive flows in August for the first time in several months, according to Lipper. That could signal investors’ growing aversion to equity funds and a growing appetite for less risky investments such as long-term bond funds, according to Lipper.

"The actions of fund investors in August betray the scent of fear," said Don Cassidy, senior research analyst at Lipper, in a statement. "Investors have shown a consistent pattern of buying and holding equity funds in high markets and of selling or avoiding purchases in low markets, and last month was no exception. Fear seems to rule optimism in times of greatest opportunity."

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.