Puzzling Money Flows From Investors According to Investment Company Institute

According to the Investment Company Institute (http://www.ici.org/) a National Associations for Investment Companies (Mutual Funds), money flows from investors continues to move towards fixed income/bond investments.

Typically the numbers from ICI, which we follow closely, give professional investors an idea of what NOT to do, as many times the investing crowd does the wrong thing at the worst time. See Related Chart  

We are somewhat worried by this as we have great concerns related to the fixed income markets. Just a few of our Posts:

• U.S. Dollar, Down and Out, or Not to Worry? (Part One of A Series)
• An Interesting Time with W. Michael Cox, Former Chief Economist of the Dallas Fed
• A Coiled Spring Being Held Down…Careful !

 The Question is why is the money going to fixed income and where is it coming from?

A couple of hopeful possibilities of why the money is going to fixed income: 

• Funds being chased out of low returning short-term investments such as CD’s or checking accounts but not with reckless abandonment
• Re-allocation from riskier assets
• Pension fund allocation changes
• Foreign Investors

Our worst case possibility for investors moving into Fixed Income Investing:

• Chasing Returns (looking back over the last few years, bonds have returned better than equities)

Where the funds are coming from?

We are not sure, but suspect, and hope, from diligent investors who are carefully allocating their portfolios, and remembering if rates rise quickly, longer termed fixed income investments will sustain substantial loss of value.

Have a Good Day!

JK