Conservative Equities Fund investors appeared confident, if not ebullient, through summer's end, as robust gains in financial markets helped allay most post-correction bearishness. Clearly, some investors needed more than a few weeks of positive returns to persuade them to return to homegrown equities. Portfolio diversification rather than relative market strength appeared to motivate many buyers, since returns in overseas bourses generally failed to match the impressive gains of the U.S. market. Corporate bond products also enjoyed a healthy uptick in inflows in September, largely due to the popularity of high yield funds.
High yields have, in recent months, become the strongest performers among domestic bond products.
Captive and wholesale firms have been the primary beneficiaries of high yield inflows, being led by Putnam, AIM, Fidelity Advisors and Merrill. While Vanguard has benefitted from an understandable turn among investors to more conservative equities, Fidelity is still reeling in the wake of Magellan's subpar performance. Extraordinarily bullish domestic and foreign markets, punctuated by the Dow's advance past 6000, all but guarantee continued strength in equity sales in October and perhaps through year's end. Slow economic growth and low inflation have also firmed up bond markets, but returns remain insufficient to incite a significant increase in inflows. Double-digit gains in emerging markets bonds may, however, make these funds an exception.