Money Flowing Back Into Mutual Funds

Sandler O'Neill & Partners

INDUSTRY MUTUAL-FUND NET FLOWS turned positive last month, with retail investors adding $80 billion to mutual funds in October, versus $163 billion of net outflows in September.

That said, net flows were down year over year, and the mix meaningfully deteriorated. While net inflows into money-market funds reached an all-time high, both equity and (more surprisingly) fixed-income portfolios suffered record outflows in October.

Not surprisingly, equity-fund net outflows surged to $64 billion in October from $23 billion in September, easily eclipsing the previous high of $42 billion in July 2002. The outlook for flows going forward ...