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At Deadline

Mutual Funds Have Bled $2.5 Trillion Since May

Mutual funds had $9.5 trillion in assets as of Oct. 31, a full $2.5 trillion, or 21% less, than their year-to-date $12 trillion under management peak at the end of May, Lipper data shows. Since the beginning of the year, when mutual funds had $11.7 trillion under management, assets have fallen 19%.

Going back to Lipper's archive of data dating to 1959, the biggest annual percentage drop in assets on record was in 1973, when they fell 20%, and 1974, when they dropped 21%.

Noting that the Dow Jones Industrial Average was on track to decline more than 9% in November, Lipper Senior Analyst Tom Roseen told The Wall Street Journal: "Funds are still going to have difficult periods to go through."

Certainly, billions of dollars in redemptions have exacerbated the market's steep declines; stock funds lost $86 billion in October. Even fixed-income funds lost $44.3 billion. To put the fixed-income mutual fund redemptions in perspective, the very worst monthly outflow prior to 2008 was in September 1992, when $37 billion left such funds, and May 2004, when $16.7 billion was lost.

Even funds that invest in investment-grade debt are losing assets, Roseen noted. "Bond funds just got crushed. People just don't trust the ratings for these things anymore," he said.

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