Tuesday, June 30, 2009 7:34 AM
Americans rediscover stocks and bonds
Andrew Willis
A hint of economic recovery in recent months was enough to draw cash off the sidelines and in to equity mutual funds.
U.S. long-term funds – holding stocks, bonds or a blend of securities – had their single best month ever in May, with inflows of $52.8-billion (U.S.), according to data released this week by the Investment Company Institute (or ICI).
“At this juncture, it is worth noting that even if investors’ interest for equities is coming back, the bulk of the new inflows are still directed towards bond funds,” said a report on the ICI statistics on Tuesday from National Bank Financial. Over the past two months, $60.2-billion went into bond funds, while $30.2-billion was earmarked for stocks.
In Canada, investors were less willing to put their faith in the stock rally that began in March. Inflows to long-term mutual funds totally just $1.9-billion (Canadian) in May, down 21 per cent from the same month in 2008, according to the Toronto-based Investment Funds Institute of Canada .
In looking at U.S. mutual funds, National Bank Financial analyst Stéfane Marion said: “As we look ahead, we remain of the opinion that equity funds are likely to be the main beneficiary of inflows once we get the confirmation of economic recovery.”
“The scope for a potential redeployment of funds remains significant with 37.4 per cent of total mutual fund assets still held in cash at the end of May,” said Mr. Marion. Equity funds currently account for 40 per cent of total U.S. mutual fund assets, well below the historical average of 51per cent, said National Bank Financial.
In Canada, IFIC statistics show money market funds – which are close to cash – make up 13.6 per cent of the mutual fund market.
