For the first time since 1994, investors sold more Vanguard Group funds than they bought last month, as investors fled low U.S. bond yields.
The Malvern-based mutual fund company, one of the nation's largest money managers with over $2 trillion in assets, saw net withdrawals of around $100 million for that month, the first since December 1994, according to spokesman John S. Woerth. Investors sold a net $9.7 billion in Vanguard bond funds and $0.4 billion in "balanced" bond-and-stock funds in June, while buying not quite as much, total, in stock ($4.8 billion) and money market ($5.2 billion) funds.
Investors have been dumping bond funds as the Federal Reserve has signalled it won't keep buying U.S. debt indefinitely -- even though rates have trended higher as the government has had to pay more to entice investors.
Why has selling outpaced buying now, and not in, say, the fall of 2008, when investment markets stalled? Woerth cited two likely factors: "1994 was a bad year for both stocks and bonds, versus 2008, in which the pain was relegated to stocks;" plus the fact, he says, that "more investors have learned the value of a long-term, balanced approach." Vanguard has been warning risk-averse customers not to overload on bonds since 2008. It's as if more are now taking the company's advice.
For January through June overall, "our cash flow remains strong -- $76.8 billion --and industry leading," Woerth added. Separately, he told Bloomberg here, "All streaks must come to an end."
If Vanguard catches a cold, other fund groups have pneumonia: Citing industry data, Bloomberg says investors cashed out $60 billion from bond funds last month, with bond-heavy investment outfits like Pimco posting larger outflows than Vanguard.