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Asset Allocation Funds Absorb 2/3 of Flows in 04

Investors are diversifying and how. More than two-thirds of stock and bond net inflows in 2004 were part of a structured asset allocation program, according to research firm Strategic Insight.

The trend of diversifying across asset classes is increasing at a fervent pace. Funds-of-funds, for instance, are gaining popularity as investors move away from starred funds and single company stocks. Last year, funds-of-funds took in $60 billion in net new flows, nearly twice 2003 and four times 2002 inflows.

Similarly, mutual fund wrap program inflows exceeded $50 billion last year, while single funds structured for asset allocation added $30 billion in 2004 inflows.

"This accelerating shift from single-fund exuberance, and often, disappointment, reflects a secular change in investors' attitudes and bodes well for long-term satisfaction, expectation management and asset stability," said Avi Nachmany, Strategic Insight's director of research.