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Equities Are Increasingly a Favorite Among You and Your Neighbors

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Geopolitical concerns be damned: during the month of February, net flows into equity funds once again exceeded net flows into fixed income funds for a fourth consecutive month.

Specifically, according to the latest data from Strategic Insight, retail equities reported $26.7 billion in total net inflows in February. That’s down from $39.2 billion in January, but still their highest monthly total in the previous four years.

The equity inflows occurred as stock markets continued marching higher: in February, the S&P 500 rose 3.4% while the MSCI EAFE jumped 3.3%.

Despite the strong run in the equity markets, net flows into taxable bonds held relatively steady in February, equaling $14.2 billion versus $15.7 billion in January.

Unsurprisingly, given all the negative headlines about debt-strapped states, muni bond flows remained negative, suffering $4.5 billion in net outflows, although, analysts note, that was much better than the $13.9 billion and $13 billion in net outflows during December and January, respectively. In February, the S&P National Muni Bond Index returned 1.7%.

How are the asset managers benefiting from these trends?

This morning, Daniel Fannon, the analyst who covers the industry for Jefferies, said that of the 10 managers he tracks, four exhibited positive net flows into both their equity and fixed income funds -- Franklin Resources (BEN), Eaton Vance (EV), T. Rowe Price (TROW), and Waddell & Reed Financial (WDR) -- while five of the firms -- Affiliated Managers Group (AMG), BEN, Invesco (IVZ), TROW and WDR -- experienced an improvement in total net long-term flows in February.

“Looking back over the previous year, these managers continue to form a select group that consistently attracts a significant percentage of the industry flows,” Fannon told his clients. “Looking ahead, we anticipate these same managers will continue to attract the bulk of flows given their well diversified offerings, strong distribution networks, and generally good relative performance.”

Among the traditional asset managers, Jefferies currently has Buy ratings on AMG, IVZ, Legg Mason (LM) and TROW. Among alternative asset managers, the team there favors Blackstone (BX), and Och-Ziff Capital Management (OZM).
POSITION:  No positions in stocks mentioned.