MIAMI -- Fund distributors are seeing the ‘best flows in years,’’ according to Sandy Motusesky, director of investment solutions at the Pershing unit of BNY Mellon.
“If business continues at this pace, we will triple our flows this year,’’ she said, in a panel at the 2013 NICSA Annual Conference and Expo. Services supplier Pershing, she said, handles about $400 billion in fund assets. BNY Mellon has about $1.4 trillion in assets under management, making it the seventh largest U.S. asset manager.
Most notable is the flow of fresh capital into stock funds. Last year, she said, more than 90% of what Pershing handled was in fixed-income products. Now, it’s split 50-50 between stock funds and bond funds.
According to the Investment Company Institute, $19.6 billion was put into domestic stock funds in the four weeks ended January 30. And $38.1 billion for all equity funds.
That compares to $80 billion that got pulled out of domestic stock funds and $4.4 billion pulled out of international stock funds in the four weeks ended Dec. 31.
And did beat out the $31.6 billion put into bond funds, in January.
"We've clearly begun to see a rotation back into equities,’’ said Peter Thatch, managing director of global funds at Merrill Lynch. It's not dramatic, he said, but it's there.
Investors in bond funds are looking for products based on shorter durations and more payout flexibility.
But investing in bond funds is not the same as investing in bonds, said Greg Dosmann, a principal at brokerage Edward Jones.
Bonds provide fixed amounts of income and holders get the original value back, if they hold them to maturity.
That’s different from bond funds, where there is no guarantee of income or return of principal, he notes.
The bond funds are not like money funds, where the $1 a share value of assets promises preservation of capital, he said.
“There is no such thing as being half a step away from being a money fund,’’ he said.
Which could lead to investor shock, if interest rates start to rise. The values of bond funds could plunge, which "will be a big challenge to manage through, when that event does show up,’’ said Bill Rittling, an asset manager based in Boston.
But asset managers have been predicting interest rates will rise, for two or three years. And, so far, the Federal Reserve has kept its rates for lending money at near zero.
“We keep thinking interest rates are going to rise and some day we'll be right,’’ said Thatch.