Early Figures Put Stock Fund Inflows at 2-Year Low

Individual investors’ net purchases of stock mutual funds were estimated to have fallen to near two-year lows in July, the funds’ chief trade group said Wednesday in a widely expected announcement.

Hurt by redemptions as some investors exited the market during July’s scary decline, stock mutual funds took in a net $3.5 billion last month, the Investment Company Institute estimated.

If the figure holds when final data are reported later this month, July’s inflow would be the lowest monthly total since stock funds took in $3 billion in November 1994, ICI figures show.

June inflows to stock funds, in contrast, were $14.5 billion.

Despite the July decline in net cash flow, early indications are that more investors are buying stock funds this month, and that redemptions are ebbing, as the stock market rebounds.

In the last few days, stock funds overall took in cash at an estimated monthly rate of almost $35 billion, according to Mutual Fund Trim Tabs, a Santa Rosa, Calif., newsletter that tracks investor purchases and redemptions.

“We’re seeing the strongest net equity inflows since April, which was the highest level ever for us,” confirmed Gavin Quill, spokesman for fund company Scudder, Stevens & Clark in Boston.

Many fund companies say the problem in July wasn’t so much that purchases of funds dropped off as that redemptions surged, as some investors decided to take profits. T. Rowe Price Associates, a major fund company, said its gross purchases of stock funds were actually higher in July than in June, but that redemptions also rose sharply.

Meanwhile, the ICI estimated that a net $1.5 billion flowed out of bond funds in July. That would be the largest monthly outflow since June 1995.