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BOSTON – Investors shook off some of their caution in this year's second quarter amid a rising market, shifting the largest amount into stock and bond mutual funds in more than two years, a fund industry consultant reported Tuesday.
A total $136 billion flowed into stock and bond funds during the April-through-June period, according to New York-based Strategic Insight.
That's the biggest flow since the first quarter of 2007, when the total was nearly $150 billion. The totals exclude money-market mutual funds and exchange-traded funds.
In the latest quarter, bond funds were the bright spot for the nearly $11 trillion U.S. mutual fund industry. About two-thirds of the cash flowing in went to bond funds, with the remaining third going to stock funds, which are generally riskier than bond funds.
"Investors are tiptoeing back into riskier asset classes," said Loren Fox, a Strategic Insight research analyst.
Investors put more money into stocks funds than they took out for all three months of the recent quarter as the Standard & Poor's 500 index rose more than 15 percent, Strategic Insight said.
U.S. stock fund investors were rewarded with their biggest quarterly gain in nearly a decade, as U.S. diversified equity funds posted a 17 percent average return, according to data released last week by fund tracker Lipper Inc. It was the best performance since 1999's fourth quarter.
The recent return to stock funds contrasts with late last year, when investors fled stocks and many classes of bonds for low-yielding money-market funds and Treasury bonds that offered greater safety amid plunging markets.
In last year's fourth quarter, investors pulled more than $100 billion from stock and bond mutual funds, excluding money-markets, according to Strategic Insight. In this year's first quarter, stock funds saw about $51 billion flow out, a total that was offset by the $50 billion that flowed into bond funds.
But after a recent market low in mid-March, investors returned to stock funds.
"Despite continued economic uncertainty, the mutual fund industry has enjoyed remarkable stability relative to other financial services sectors," said Avi Nachmany, Strategic Insight's research director.
A big share of the money flowing into stock funds recently has gone to those investing overseas, where markets have risen more sharply — including since mid-June, when U.S. market's spring rally stalled. Of the $47 billion that flowed into stock funds in the second quarter, about one-third went to international stock funds, Strategic Insight said.
