has released its report on how mutual funds performed in July, and it isn't pretty. The most striking figure, perhaps, is that there were net redemptions of $49 billion, Don Cassidy, senior research analyst at the firm, told the MutualFundWire.com.
This figure represents the largest net redemption in a single month ever. September 2001 comes in second with net redemptions of $30 billion. The July 2002 number equals approximately 1.6 percent of the previous month's assets.
"This was classic crowd behavior, probably marking a significant market bottom," Cassidy reported. "The pain and the fear became unbearable and several million investors gave up at virtually the same time, just as the selling climax in stocks that ended the morning of July 24 showed."
"It wasn't a good month," he contended. "But it was also not a good month for the investors who bailed out because the market rallied. Last September, the net redemptions were triggered by the 9/11 attacks and world events. July's sell off was triggered by the market itself."
"The August thinking seems to be there is not going to be much more new bad news. All the accounting scandal revelations are pretty much out there. So, people are starting to relax now that the pressure is off," the analyst continued.
There were some bright spots in July nonetheless. Lipper reports that investors still found some love in their hearts for specialty world equity funds. International small-cap funds, for instance, had inflows of $200 million, while Japanese funds had inflows of $50 million. Lipper believes this segment is doing well because of flight from the U.S. dollar and the weak local stock market.
Meanwhile, bond funds had net inflows of $19.2 billion in July. Those offerings that focus on shorter-maturity asset types were the biggest beneficiary.
"Mutual funds weathered the storm well. Share prices were down, but that wasn't the fund firms' fault. They handled the redemption situation well. On average, funds were not forced to liquidate, which helped the markets. We go through these things every once and a while, but the industry handled itself well," Cassidy concluded.
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