Investors have developed a serious aversion to U.S. equity mutual funds, which is upsetting the balance of fund flows, according to Morningstar.
So far this year, investors have yanked $14.6 billion from U.S. equity funds and poured $102 billion into taxable bond funds, Morningstar’s data shows.
There is good reason for this, of course. While the S&P 500 Index has fallen 6.6% this year, U.S. equities dropped 16% in the four weeks ended August 19. By comparison, long bond funds are up 17% so far this year, making them the best-performing fund category.
“It’s been a flight to bonds and away from equities,” Morningstar Analyst Ryan Leggio told TheStreet.com.
“We’ve seen pressure on stocks due to macroeconomic concerns, so it’s made it a challenge for any portfolio manager to gain ground,” added Todd Rosenbluth, a mutual fund analyst with Standard & Poor’s. “The ones that have done well have been in more defensive sectors, such as healthcare and utilities. Investors are looking for stability and income.”