Mutual funds sales to decline

Somewhat lost in the news and worry over financial reform, mutual funds (mutual fund news) have been on a tear. Through April, a net $187 billion flowed into domestic mutual funds, according to Financial Research Corp. That puts the industry on pace to beat the previous record of $347 billion in inflows in 2009. But FRC does not expect this torrid pace to continue, notes Reuters, and the industry will likely fall short of a record.

Investors nowadays are conditioned to cash out when markets turned volatile. We saw that especially in May. Fund executives say that customers are holding onto to funds for shorter time spans. In addition, the ranks of financial advisors continue to tumble. This is a crucial sales channel for mutual funds, as retail financial advisers still accounted for about 60 percent of total sales in 2009.

You also have to wonder about the rise of ETFs and other new products. Mutual funds are hardly the only game in town. FRC predicts inflows in 2010 will end up at about $275 billion, with an additional decline in 2011.

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