Investors Bolt from Bond Funds with Record Redemptions

$24 billion largest volume of outflows since the end of October 2008
By MainStreet Team ,

By Hal M. Bundrick

NEW YORK (

MainStreet

)--The run from taxable bond funds became a full-on sprint during the month of June, with the largest volume of outflows since the end of October 2008. Nearly $24 billion exited the market for the four-week period ending June 26, with $8.6 billion moving in just the last week of the month, according to Lipper.

High-yield funds saw the most movement, with a fifth consecutive week of outflows contributing to a four-week record exit of $11.4 billion. Corporate investment-grade bond funds also experienced near-record outflows, garnering $2.3 billion of redemptions for the week ending June 26.

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Investors bailing from bond funds included the tax-free segment as well. Municipal debt funds reported record weekly net outflows of $4.5 billion while Lipper reports the average municipal debt fund lost 2.28% in performance for the week.

Where did the money go? Bank loan funds saw continued investor appeal as they extended their inflow streak to 54 weeks with $1.1 billion of net new money invested. But investors seemed most content to jump to the sidelines and park their assets in money market funds, which saw approximately $5.0 billion in net new money.

On the equity side, stock mutual funds and ETFs experienced a broad sell-off with $6.8 billion of net outflows, though most of the movement was dominated by deep selling in ETFs (-8.4 billion), led by SPDR S&P 500 ETF (SPY) with outflows of $3.6 billion.

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Retail-dominated equity mutual funds were moving in the opposite direction with net inflows of $1.6 billion, extending the group's winning streak for the year. Investors wer most drawn to nondomestic offerings (+$1.3 billion net), while domestic equity mutual funds (+$282 million net) also ended the week in the black.

"The biggest surprise with stock funds may have come within the developing market space," wrote Matthew Lemieux in a research report for Lipper. "Emerging-market mutual funds and ETFs eked out net inflows of $84 million -- not a large sum, but a clear improvement from the $6.0 billion of net outflows the group suffered over the previous four weeks."

--Written by Hal M. Bundrick

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