As bonds were pummeled in July, mutual fund investors reacted by unloading fixed-income assets for the first time in over a year and turning bullish on stocks, according to data from Lipper, a
Fixed-income and money market funds lost $19.7 billion in July. Meanwhile, equity funds received an estimated $21 billion, one of the 10 best months in the past five years, with total inflows into U.S. funds adding up to $1.3 billion.
The Lipper report also said liquidations in bond funds, which were estimated at $8.8 billion, were the first outflow since December 2001 and the largest since the end of 2000. Money market fund outflows totaled $2.1 billion, the first loss in 15 years.
"It appears that the lessons about asset allocation have been quickly forgotten with the first palpable drop in bond prices," said Lipper senior research analyst Don Cassidy. "No doubt, the gathering confidence about stocks and the arrival of modestly better economic news have drawn some money from bond funds as well."
Net flows into sector funds, considered riskier investments than broadly diversified funds, rose 20% to $900 million, the highest level since April 2001. Meanwhile, the more conservative mixed-equity funds saw a drop of $1 billion to a total of $5.5 billion in July.