California Mutual Fund Outflow Soars in April

California’s costly electricity crisis and deteriorating credit-worthiness pushed investors to pull $3.5 billion from California mutual funds in April, CBS MarketWatch reported, citing data from fund tracker Lipper Inc..

“Investors are very sensitive to events,” Don Cassidy, senior research analyst with Lipper, told MarketWatch. “Performance in those funds for the month was more negative than the performance in bond funds elsewhere.”

California money market funds lost $3 billion in April, or 8.6% of the total $35 billion in assets. In March, outflows amounted to only $420 million.

California bond mutual funds, with $42 billion in assets, saw assets decline by $500 million in April, compared with a decline of $241 million in March, according to MarketWatch.

California funds represented only 3.8% of all tax-exempt mutual fund assets in the nation in April but suffered 29% of the net outflow.

In the last month, Standard & Poor’s and Moody’s Investors Service have downgraded the credit rating on $25 billion in state bonds, citing increasing financial risks from the state’s purchases of electricity on behalf of Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric.