Investors Leaving Money Markets, As Flows Go to Bonds, Equities

According to the latest Lipper research, investors withdrew nearly $150 billion from money market funds in March, their 14th straight month of net redemptions. They chose to pump money into both bond funds (+$36 billion) and stock and mixed-equity funds (+$27.5 billion).

Overall, bond funds experienced net inflows for the 15th consecutive month, and for the third month in a row stock and mixed-equity funds gained assets.

Meanwhile, world equity funds (+$11.2 billion) attracted large net inflows as well. In the fixed-income area, intermediate investment-grade debt funds took in $9.6 billion in March.

For the full quarter, U.S. diversified-equity funds took in $15.9 billion, and world equity funds attracted net $28.5 billion, notes Tom Roseen, research manager for the Americas at Lipper.

For the one-year period ending March 31, sector equity funds had $21.6 billion of net inflows, of which close to 60 percent or $13 billion went into commodities funds. During the first quarter, sector equity funds drew in a net $6.2 billion.

In March, for the third consecutive month, investors were net redeemers of fund assets, withdrawing some $85.9 billion from conventional funds such as money markets but excluding ETFs.

When flows of money markets and proprietary funds of funds are taken out of the fund-flow data, though, Financial Research Corporation found that stock and bond funds experienced net inflows of $70.0 billion in March.

The corporate bond objective led the net inflow category with $24.5 billion, followed by the domestic equity objective with $18.2 billion, FRC says. Pimco's Total Return fund attracted $4 billion to lead the fund sales charts.

Estimated net flows by Morningstar category for the month were roughly $11 billion to intermediate-term bonds, $6 billion to short-term bonds, $5 billion to world bonds, $4 billion to high yield bonds, $3 billion to large blend funds and $3 billion to world-allocation funds. Other categories, such as inflation-protected bonds, had flows of between some $1 billion and $3 billion for the month.

Vanguard continued to top the list of the largest fund groups at $1.2 trillion in assets.

In terms of fund families that have grown the most in the first quarter of 2010, JPMorgan Asset Management increased 12.42 percent.

Other groups with 9 percent growth or higher include Pimco, Eaton Vance, Goldman Sachs Asset Management and Lord Abbett.

Several individual funds with gains of more than $2 billion in assets in March are the Pimco Total Return Fund, SPDR S&P 500 ETF and Templeton Global Bond Fund.

In the first quarter, the Pimco Total Return Fund grew by $12 billion in assets, while the Templeton Global Bond Fund added $5 billion in net flows.

The industry had some $8 trillion in fund assets as of March 31, including a jump of about $132 billion in the first quarter of 2010.

In 2009, some $1.1 billion in outflows was tallied by FRC, indicating that fund flows are now making a significant recovery from last year.