IB Net Payout Yields Model

Fund Flows Turn Slightly Positive For Equity Funds

For the week ending 2/15/12, the flows into long-term equity funds were $11.9B according to the Investment Company Institute. The kicker though is that the majority of the funds still went into bonds with only $35M flowing into domestic equities.

Along with straight bond funds that have been averaging over $7B in the last month, hybrid funds are hot. Hybrids invest in both bond and equity funds suggesting that investors still favor a high mix of bonds.

Over the last 5 weeks, equity funds have had positive flows for 3 of the weeks. Still the flow percentage for equity funds remains around 10%. Suggesting that even one of the strongest rallies ever to start a year isn't enough to draw investors back into the market.

These number put into question the investment sentiment numbers. How can investors be wildly bullish on equities if the fund flows are so benign. If anything, the suggestion is that bond investors remain overly bullish. The correction should be in bonds. 

See below table from ICI:

                      1/18/2012    1/25/2012    2/1/2012    2/8/2012    2/15/2012
Total Equity    -480              1,157    -1,698    3,640    1,043
     Domestic    -801                 834    -1,807    1,936    35
     Foreign        320    323    108    1,703    1,008
     Hybrid       1,262    2,624    2,196    2,491    2,660
Total Bond      5,989    7,674    7,491    7,054    8,196
     Taxable      4,246    6,503    5,865    5,314    6,463
     Municipal    1,743    1,170    1,626    1,740    1,733
Total                 6,771    11,454    7,989    13,184    11,899



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