WRAPUP 3-Strong bond inflows boost asset managers' results

Tue Jul 26, 2011 1:27pm EDT

* Invesco bond and money funds outdraw its equities funds

* T. Rowe bond inflows match equities and blended funds

* Industry executives say they're coping with volatility

* Invesco, T. Rowe, Waddell & Reed and AMG shares up (Adds AMG executive comments, details on T. Rowe; updates share movement)

By Ross Kerber and Aaron Pressman

BOSTON, July 26 (Reuters) - Several large U.S. asset managers reported solid quarterly results on Tuesday as an influx of cash to fixed-income funds helped offset somewhat reduced flows to stock funds amid investor uncertainty.

T. Rowe Price Group (TROW.O), Invesco Ltd (IVZ.N) and Waddell & Reed Financial Inc (WDR.N), which have been among the biggest gatherers of new client cash, continued the trend in the second quarter.

Invesco and Waddell & Reed beat analysts' second-quarter earnings estimates. But while they and T. Rowe had strong flows into their bond products, fund executives said small investors remained uncertain about where to put their money.

"The retail investor is generally confused about what's going on in the marketplace, especially given what's going on in Washington," T. Rowe Chief Executive Officer James Kennedy told Reuters. "They don't know if they ought to be in equities or fixed income."

While bonds generally have not been as profitable as equities for mutual fund companies, the second-quarter profit gains suggest the industry is learning to live with volatile stock markets that usually scare retail investors away from equities funds.

Shares of Invesco were up 2.9 percent at $23.25 in afternoon trading, while T. Rowe rose 0.8 percent to $60.44, and Waddell & Reed gained 1 percent to $38.26.

Invesco's bond and short-term money market funds thrived. Investors poured $3.5 billion into bonds and $3.5 billion into shorter-term money accounts, making up the bulk of $7.3 billion in inflows. But the total was lower than the first quarter, when net inflows at the Atlanta-based company were $9.2 billion, heavily weighted in bonds.

Chief Financial Officer Loren Starr said flows weakened during the quarter as investors fretted about market volatility and the Greek debt crisis. "We're hopefully seeing some stabilization," he said during a conference call with analysts.

T. ROWE PRICE

Baltimore-based T. Rowe Price reported second-quarter net inflows of $9.8 billion, up from $5.8 billion in the first quarter. Inflows to sponsored mutual funds increased to $4.6 billion from $4.4 billion.

Among its funds, the latest flows were almost equally divided between stocks and bonds. In the first quarter, stock and blended funds drew $2.9 billion and bond funds, $1.8 billion.

T. Rowe also reported net inflows of $5.2 billion to other investment portfolios, including separately managed and subadvised accounts. Of those flows, slightly more were into fixed income portfolios than stock portfolios, said spokesman Brian Lewbart.

The company's money market funds took in about $200 million during the second quarter, compared with net outflows of about $300 million in the first quarter. Across the sector, these funds have suffered because of low interest rates.

Assets under management at T. Rowe Price were $520.9 billion at June 30, up from $482.0 billion a year earlier. At Invesco, they rose to $653.7 billion from $557.7 billion.

WADDELL AND AMG

Waddell & Reed, a smaller company with $91.7 billion under management at the end of June, reported inflows of $1.2 billion to equity funds for the second quarter, outpacing $525 million that went into fixed-income funds.

But the equity figures included outflows in sales through financial advisers and to institutions, while its bond-fund sales through advisers rose and sales to institutions were essentially flat.

A fourth asset manager that reported results on Tuesday, Affiliated Managers Group Inc (AMG.N), beat earnings expectations.

The Boston company does not break out flows by asset class. Total assets under management among its affiliated investment firms as of June 30 were $348.4 billion, up from $250 billion a year earlier.

On a conference call with analysts, AMG Chief Executive Officer Sean Healey said U.S. retail and institutional investors had been moving out of equities, but the company expects them to return at some point when they are willing to take more risks.

Just when that happens, he said, "will depend on macroeconomic factors and political factors."

Shares of AMG were up 4.3 percent at $106.62. (Additional reporting by Dan Wilchins; editing by John Wallace and Lisa Von Ahn)

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