Bond Funds Came Back. Will Investors?

Equities are getting all the attention, but bonds hold plenty of potential for gains

Suppose the bond market staged a rally and nobody came. That's what happened during 1995. Bond mutual funds scored solid double-digit total returns of 16.4%, including dividends and capital-gains distributions, more than reversing 1994's losses. That wasn't enough to keep investors in the fold, as $4 billion more flowed out of the funds than went in, a striking contrast to the $129 billion that piled into equity funds. This year, about $2.6 billion has come back to bond funds, but investors are deploying it very selectively, according to AMG Data Services, which tracks flows to funds. Most of the new money is going to corporate bond funds. Municipal bond funds are flat, and money is still exiting the government bond funds.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.