Investors retreat from small caps

Shaken up by mortgage market worries, investors are retreating from funds that invest in bonds and equities.
AUG 14, 2007
Shaken up by mortgage market worries, mutual fund investors are retreating from funds that invest in bonds and equities. Small-cap-value and small-blend funds were among the worst hit, losing 10% and 9.37%, respectively in the last month, according to data from Morningstar through Monday. In response, cash flowed out of equity funds last week, totaling a loss of $298 million, while domestic funds lost nearly $600 million, according to AMG Data Services. Cash also seeped out of vehicles that relied heavily on credit, such as the specialty real estate investment funds. In the last month, losses have hit 8.49%, a stark contrast to the five-year return of 19.49%. High-yield bonds have also seen falling performance, with one-month losses hitting 2.43%. However, investors may be flocking toward money market funds to escape the high-risk atmosphere. Net cash inflows into these funds hit $36.2 billion last week, a high not seen in nearly two years, AMG said.

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