Flows into value and growth funds for the first six months of 2001 have been turned upside down compared to the same period a year ago, according to Strategic Insight of New York.
Net new flows into U.S. value funds will be $26 billion for the first half of 2001, compared to net outflows of $46 billion in those funds during the first half of 2000, according to Strategic Insight estimates. Likewise, bond funds experienced net new flows of $38 billion so far this year, compared to outflows of $40 billion in 2000. Conversely, flows into U.S. growth funds have slowed to a trickle, with roughly $1 billion for the first half of 2001, compared to $167 billion for the same period a year ago, according to Strategic Insight. During May, equity funds gained nearly $20 billion in net inflows, half of which came solely from value funds, according to Strategic Insight. 'Last month the average equity fund gained little and remained in the minus column for the year. But smaller cap value funds, already up more than 20% for the past year, again delivered the highest appreciations among all diversified equity fund', said Avi Nachmany, director of research for Strategic Insight. For the first half of 2001, small and mid-cap value funds attracted over $15 billion in net new inflows, which is 'an extraordinary growth for a sector controlling only $80 billion at the beginning of 2001,' according to Nachmany. Inflows into taxable bond funds was more than $6 billion in May, about half of which came in junk bond funds, according to Strategic Insight. 'We would expect further expansion of bond funds in the second half of 2001,' said Nachmany. 'Due to the aggressive actions by the Federal Reserve in recent months, with more easing of short-term rates probable, many of the conditions that facilitated rising bond fund demand in the past are in place today, a combination not seen for eight years.'