Mutual Fund Buying Takes a Steep Dive
Mutual fund investors have a bad case of cold feet, as purchases of fund shares plunged in August, and the trend is apparently continuing this month.
Total purchases of stock and bond fund shares in August dropped to $29.8 billion, off 6.4% from July’s $31.8 billion, the Investment Company Institute reported Monday.
In September, meanwhile, “there’s been a continuing abatement of demand,” said Bob Adler, whose firm AMG Data tracks weekly cash inflows and outflows at major fund companies.
Many people appear reluctant to commit money to stocks or bonds given the uncertainty over the economy and the presidential election, fund companies say.
The slide in fund fortunes is greater than the total-purchases figures show. Measuring only “net new cash flow”--that is, fund purchases adjusted for redemptions, and for exchanges among funds in the same firm--stock and bond funds took in $12.8 billion in August, down 30% from July. However, the August total still topped the $9.8 billion in August, 1991.
Among specific fund categories, demand fell most sharply in August for aggressive-growth stock funds, international stock funds and mortgage-bond funds.
This month, Adler said, investors are fleeing global bond funds, which have been hurt by Europe’s currency crisis. Ironically, those funds had surged in popularity in August: Total purchases had soared to $2.04 billion in August from $1.28 billion in July.
