Uncertainty may be driving retail investors out of equity funds. That conclusion is hinted at by Lipper in its monthly fund flow report released Monday afternoon. While total flows to equity funds reached $8 billion, the fund tracker estimates that as much as $10 to $12 billion of equity fund buys are on autopilot through 401(k) plans. Take those numbers out and equity fund flows were negative, according to the report.

Lipper's Don Cassidy suggests in the report that retail investors are "apparently unprepared to make more than minimal perceived risk in the short term when making decisions." He also warns that their timidity may last for months until the election and terrorism fears are resolved.

If his hypothesis is correct -- and the finding that hybrid funds outsold straight U.S. equity funds by nearly four to one in July suggests that it may be -- fund firms are facing a stretch when more staid options are likely to outsell aggressive funds. It is little surprise then, that value funds outsold growth funds by $3.3 billion to a negative $1.9 billion in net flows last month.

Also popular (popularity here being a relative term) were world equity funds. That group took in $3.0 billion compared to $1.0 billion of net flows to U.S. equity funds and $3.9 billion to world equity funds. Interestingly, alarms over possibly rising interest rates have also meant that fixed income funds are no longer seen by retail investors as a haven. All counted, investors pulled a net $1.5 billion from bond funds in July.  

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