Equity funds are almost all but certain to see their first year of outflows since 1988, and inflows into bond funds are on pace to reach record heights, according to Lipper of New York’s November fund flows report.

Equity funds showed inflows of $10 billion in November, with $3 billion coming from institutional classes and $7 billion from retail. November marks the first month that equity funds had made gains since May. Other fixed-income funds had inflows of $7 billion, with $1.6 billion in institutional classes and $5.4 billion in retail classes. And while money market funds had inflows of $119 billion, with $125 billion of inflows in institutional classes, the category had outflows of $6 billion in retail classes.

As for diversified equity funds, large-cap saw a total net outflow of $2.9 billion, with inflows of $3.9 billion in multi-cap, $1.6 billion in mid-cap and $1.7 billion in small cap. That makes for a total of $4.3 billion of inflows overall for U.S diversified equity funds. Fixed income had total inflows of $126 billion for the month.

Inflows into bond funds in November were an estimated $7 billion, according to Lipper, marking the 11 th straight month of inflows. Net inflows in 2002 are almost sure to surpass the $120 billion record set in 1986, according to Lipper. Currently inflows stand at $127 billion for 11 months of 2002.

Money market fund flows remained strong at $119 billion, more than doubling the average over the last three years of $55 billion. Retail classes continued a pattern, showing outflows of $6 billion.

"Ironically, the best of all 2003 likely worlds for the fund business may be a slow economic rebound and a flat bond market plus a modest rise in stock prices," Cassidy said. "A stronger stock market might do a little to help inflows immediately, but could well mean a decline in bonds and losses in bond funds – not a desirable outcome."

"Chances now appear slim that equity funds can avoid their first net-outflow year since 1988," said Lipper senior analyst Don Cassidy. "December is typically slow seasonally for fund buying, and stocks have declined a bit since Dec. 2, so it seems unlikely that the net inflow this month can make up the roughly $10 billion year-to-date shortfall."

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