Stock, Bond Fund Buying Slows
Purchases of stock and bond mutual funds have slowed as much as 40% in March from the torrid pace of January and February, but for stock funds the pace still is high historically, major fund companies said Tuesday.
The largest companies offered updates on purchases after the Investment Co. Institute, the industry’s trade group, reported official purchase results for the month of February.
The ICI said the net new cash flow into stock funds was $21.9 billion in February, down from a record $28.9 billion of January but still the second-highest monthly amount since the ICI started tracking fund purchases in the early 1960s.
Bond funds attracted nearly $2 billion in new cash in February, down from $4.3 billion in January.
So far this month, Fidelity Investments, the nation’s biggest mutual fund company, said net new purchases of stock funds total $2.2 billion, half the February figure.
Vanguard Group, the nation’s No. 2 fund group, said stock fund purchases through March 22 were $1.4 billion, down from $2.3 billion in all of February.
T. Rowe Price Associates said stock fund purchases have declined to $600 million in March from $1 billion in February.
Even so, T. Rowe spokesman Steven Norwitz noted that at $600 million, the March stock fund inflow is double the firm’s monthly average of the last year.
Analysts said it may not be that March is weak so much as that January and February inflows were skewed by seasonal surges in funding of retirement accounts, such as 401(k) savings plans.
Fund purchases “are bound to slow as the year goes on,” said Tim Pitts, executive vice president of New York’s Oppenheimer Funds. “They can’t stay this strong forever.”
Even so, April tends to be another strong purchase month as investors finalize tax-planning efforts and fund IRA accounts, Pitts noted.
Meanwhile, ICI data show that stock fund managers were aggressive in putting cash to work in the market in February: The average stock fund had 7.4% of its assets in cash-denominated accounts at the end of February, down from 8% a month earlier.
Small investors’ purchases of stock funds have been a key source of fuel for Wall Street’s bull market in recent years, as fund managers have injected that cash into individual stocks.
Fund companies say it’s impossible to tell whether the March slowdown may have been partly caused by investor wariness in the wake of the market’s wild volatility in March.
Historically, investors don’t sell their funds when the market turns dicey, but many do cut back on new purchases.
