Analysis: Equity burn out tilts balance of American mutual funds

An enormous preference for bond funds has tilted the balance of the American mutual funds industry, according to research published today.

According to the Investment Company Institute, a Washington-based trade group, bond funds have attracted more money than their equity counterparts for 30 straight months to June. The last time bonds went on a longer streak was from 1984 through to 1987.

Compare that with what is happening here at home. In the first six month of the year bonds were marginally the most favoured asset class, attracting £579m of assets, versus equities which saw an inflow of £525m, according to the Investment Management Association (IMA). However, from month-to-month, each asset class has swapped in popularity, with bonds top in two months (March and April) and with equities top in the remaining four. (article continues below)

This suggests that Americans feel more burnt by the two market crashes witnessed in one decade. According to ICI, American mutual bond funds pulled in some $559 billion (£359 billion) of assets over the 30 months to June, while over the same period American investors redeemed some $209.4 billion from domestic equity funds.

This lack of investment into equity funds has tilted the balance of the American mutual fund industry, says the ICI, which manages $10.5 trillion of assets.