The “cash on the sidelines” is a Supply/Demand argument that we’ve struggled with even in the most bullish of times; every purchase of a security is matched with a sale. But even taking the argument at face value, current holdings of retail investors and mutual fund managers suggest that the cash left the sidelines long ago.
While flows into the largest mutual fund category by assets have petered out in recent months, a number of impressive fund flow trends quietly remain intact.
In this report we take an in-depth look at the evolution of the industry, particularly the U.S. mutual fund industry, to help understand how some fund flow trends are more of an indication of evolving investor preferences instead of an indication of retail investor sentiment toward a particular asset class.
There were plenty of interesting facts to be discovered in reading the latest mutual fund flows report from the Investment Company Institute (ICI). The recently released report, which detailed the statistics for September, showed that there were nearly $15 billion of net redemptions from U.S. equity funds for the month. September, by the way, was a month where the S&P 500 rallied to an 8.8% gain. We have noted in the past that the public is generally a trend following herd that buys into market strength and sells on weakness.