Equity funds finally had to struggle

Now the fund investor is put to the test.

Over the summer, stocks continued to break records, allowing investors to pour money into their equity and fixed income portfolios. However, at the end of the third quarter, stock prices fell.

Ultimately, the average U.S. equity fund fell 1% per quarter, down 4% in September, according to data from Refinitiv Lipper. This reduced the progress since the start of the year to 14.5%. International equity funds fell 1.8% in the quarter after declining 3.8% in September, with cumulative profits for the year remaining at 7.1%.

Data on fund flows shows that investors continue to invest heavily in the comfort of fixed income, while having little confidence in the continued earnings of US stocks. Investors estimated a net investment of $ 8.9 billion in U.S. stocks and exchange-traded funds and $ 59 billion in international equity funds this quarter, according to estimates from the Investment Company Institute. However, they continued to invest more in fixed income funds. Net worth for the quarter was $ 129.1 billion.

As the economy recovers from a pandemic and blockade, the Federal Reserve suggests that next year it could reverse stimulus and raise interest rates.

“Most fixed income investors don’t know how to prepare for the end of the 40-year fixed income bull market,” said Tom Rosen, head of research services at Refinitiv Ripper, in a recent report. “Until recently, bond investors benefited from lower interest rates and lower relative inflation, and capital gains and income distribution contributed to the total return of fixed income funds, which is probably in danger of change. It’s on point. “

Fixed income funds linked to medium-term investment grade bonds (the most common type of fixed income fund) rose only 0.01% in the quarter, leaving a decline of 1.1% since last month. beginning of the year.

There were no strong fund categories in the third quarter. Financial services funds were a rare and successful category of ripper, up nearly 3% and 27.9% in the past year. The ever-changing gold-oriented fund fell 12.3% in the first quarter, including 8.9% in September, and 17% in the past year.

Power is the editor of the Wall Street Journal in South Brunswick, NJ. Please email [email protected]

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