Understanding Mutual Fund Flows Today
Lately mutual fund flows persistently show money added to bond funds, taken out of equity funds. Patterns accelerated in recent weeks and months. My explanation:
The great majority of funds are held through asset allocation 'solutions' (and 80%+ of new sales into such). Consequently the data implies that professional asset allocators are reducing exposure to (very expensive) stocks. I believe such small but persistent rebalancing by professionals explains the flow data (not actions by advisors or investors to buy (or sell out) of individual stock or bond funds).
Read more: my report, Looking Back, Looking Forward Issue 1 on AviNachmany.com Newsletter section.