Bonds funds globally see $8.55 b, most in a decade – EPFR

Reuters: Investors poured the most money into bond funds globally in over a decade while fleeing equity funds in renewed worries over the strength of the global economic recovery and spill over effects of the eurozone crisis, data from EPFR Global showed on Friday.

Bond funds globally had net inflows of $8.55 billion in the week ended 9 May, the most in over a decade, said the fund-tracking firm’s Director of Research Cameron Brandt, while equity funds globally had net outflows of $3.5 billion.

For US funds alone, bond funds absorbed the bulk of inflows of $6.46 billion while equity funds had outflows of $4.78 billion.

US equity funds are no longer finding love from mom-and-pop investors after a strong first quarter.

In April alone, US equity funds saw net outflows of nearly $6 billion as stock markets sagged, while taxable bond funds saw net inflows of $21 billion, research company Strategic Insight reported in a 10 May press release.

“Investors are still trying to prepare their portfolios for a repeat of 2008,” said Kate Warne, investment strategist at Edward Jones. “Anytime the stock market wobbles a bit, they rush out of stocks and into bonds,” Warne added.

The S&P 500 .SPX tumbled 3.4 per cent in the week ended 9 May, after negative data on the US services sector, a weak jobs report last Friday, and eurozone concerns after voters rejected austerity measures for Greece.

Emerging market bond funds reached eight-week high inflows of $1.05 billion and high-yield “junk” bond funds had $1.2 billion in inflows, Brandt said. Emerging market equity funds, meanwhile, had net outflows of $1.11 billion. European equity funds had inflows of $2.74 billion and European bond funds had inflows of $337 million. The high inflows into European equity funds could indicate that investors are optimistic about an upturn in Europe’s beaten-down stocks, said Rick Meckler, president of investment firm LibertyView Capital Management.

Warne added that bond fund investors who react to headlines on Europe or near-term market shifts could miss out on solid equity performance. “The flows we’ve been seeing into bond funds probably suggest that we will see many investors regret these moves over the next few years,” she said. For contrarian investors willing to take risk, the worst performing stocks could end up profitable, said one prominent money manager.

“Investors who want to believe that the world is a safe place and that equity investments, or the risky investments, are going to be good, should gravitate to the categories that are really beaten-down,” said Jeffrey Gundlach, Chief Investment Officer and CEO of DoubleLine Capital, in a web cast on Tuesday. Gundlach added that Spanish stocks were his favourite risk asset.

Gundlach’s DoubleLine Total Return Bond Fund (DBLTX.O) has raked in $7.75 billion in inflows this year through April, the highest figure among the 100 largest bond funds, according to Morningstar.