Bond Fund Exodus Rolls On

Updated from 9:13 a.m. EDT

Investors might have gone away in May, but they returned strongly in June as $1.67 billion flowed into equity funds for the week ended June 16, down only slightly from inflows of $1.9 billion the prior week, according to TrimTabs.

"Recent equity outflows, which we now estimate at $7.9 billion during May, have not continued into June," said Carl Wittnebert, director of research at TrimTabs. "People still want to own stocks."

Rival fund-flow tracking firm AMG Data reported net cash inflows into equity funds of $1.39 billion. AMG said small-cap growth and aggressive growth funds reported the largest gains for domestic funds at $622 million and $490 million, respectively.

TrimTabs reported equity funds that invest primarily in U.S. stocks had inflows of $1.7 billion, up from inflows of $1 billion the prior week. International equity funds were flat, compared to inflows of $900 million the prior week.

Paul Mendelsohn, strategist at Windham Financial, says that stronger fund flows will not necessarily push the market higher.

"The buying on the long side is being counterbalanced by hedge funds and institutions hedging themselves on the short side and buying put options," says Mendelsohn. "They want to play it safe ahead of the June 29-30 Fed meeting as well as with regard to event risk coming from the Middle East."

"Money might be coming into the market because people believe the next round of earnings will be strong," says Robert Pavlik, portfolio manager at Oaktree Asset Management. "But there's a lot of indecision out there for the short-term future."

On the fixed-income side, TrimTabs reported bond funds had outflows of $1.3 billion, on par with the outflows of $1.2 billion the prior week.

Taxable bond funds reported net cash outflows of $451 million, according to AMG. The corporate- and mortgage-backed sectors had the largest redemptions of all fixed-income categories with $337 million and $526 million, but were offset by inflows to flexible funds and Treasury funds at $149 million and $175 million, respectively.

Money market funds reported outflows of $13.5 billion and municipal bond funds reported outflows of $763 million, said AMG.