The enduring popularity of bond and money market funds, however, is in doubt. With short-term interest rates now at 40-year lows, investors may soon look elsewhere. In large measure, future flows will depend on how long it takes to restore confidence and stability in the market.
"Investors are doing what they have always done," said Geoff Bobroff, president of Bobroff Consulting, a mutual fund consulting firm in East Greenwich, RI. "Once equity returns are restored, they will move as quickly as you can blink an eye out of fixed income."
Russell Kinnel, Morningstar's director of fund analysis, said a reversal, if it comes, may not be abrupt. "I don't expect fund investors to make big moves into stock funds in the near term," he said.
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