In a break with the previous 10 months, investors poured $3.3 billion more into domestic stock funds in February than they took out.
This could mean that money managers think that equities will increase in value, said Drew Tignanelli, principal and president of The Financial Consulate, an advisory firm in Lutherville, Md., that does not disclose assets under management.
"A lot of good money managers are allocating back to the stock market with the substantial chance that a rally could take place in the next six months," he said.
"We are in a secular bear market that started in 2000," Mr. Tignanelli said. "You're going to get cyclical bull moves."
International and global stock flows surpassed U.S. equity last year, when domestic equity funds had a total of $38.2 billion in outflows, according to New York-based research firm Lipper Inc.
Of all equity funds, Lipper's mixed equity category, which largely includes target date and target risk funds, took in $9.8 billion in February, representing the bulk of the flows.
The popularity of the target date funds continued a trend that developed last year when mixed equity fund inflows outpaced investments in world equity funds, with $125.1 billion in net flows, compared with $118.6 billion.
In February, world equity funds had inflows of $7.7 billion, reversing a two-month trend of outflows.
While the appeal of domestic funds is picking up, it is too early to predict a trend, said Avi Nachmany, director of Strategic Insight of New York, adding that he expects strong fund sales to continue.
Fund sales grew across the board. For instance, equity funds added $22.7 billion, fixed income $12.6 billion, and money market funds $89.7 billion.
The appeal of target date funds increases during rocky markets, said Tom Roseen, a Denver-based senior research analyst at Lipper.
"When the market is down, investors want to let money managers make the decisions," he said. "There's more interest in the one-stop shop."
By contrast, people think it is easy to make money when markets go up, Mr. Tignanelli said.
"When you go into these difficult times, people start looking for alternatives," he said. "They want somebody else to take the burden of money management."
APPEAL TO NOVICES
Target date funds might appeal to novice investors, said Neil Elmouchi, president of Summit Financial Consultants Inc., a Westlake Village, Calif., firm with $150 million under management. He said he doesn't place that type of investment in client portfolios.
"The target date fund has a particular attraction to it," Mr. Elmouchi said. "It's one of those sound-bite type of mutual funds," he said.
Another trend is that large-capitalization stock funds are suffering outflows, a situation not typical in a down market. During a flight to safety, investors usually gravitate to large-caps, but not this time: The category has lagged for 21 of the past 22 months, and had outflows of $1.8 billion in February, according to Lipper.
Also, small-cap funds had outflows of nearly $1 billion. Investors put $100 million into mid-caps and $4.56 billion into multi-cap funds.
"The multi-cap dominance might signal a desire to leave the stock picking to the money managers," Mr. Roseen said. "These are funds where the manager decides whether to invest in large-, medium- or small-cap stocks," he said.
E-mail Sue Asci at [email protected].
