Stock Fund Inflows Back on Track

Individual investors’ net demand for stock mutual funds has revived this month after a sharp slowdown in July as Wall Street tumbled, major fund firms said Wednesday.

“It’s like July never happened,” said Gavin Quill, spokesman for Scudder, Stevens & Clark in Boston. “Investors are buying stock funds again at close to the record levels [of] earlier this year.”

In fact, many fund companies say new purchases of funds never really declined much in July--it was just that redemptions of funds by some existing investors surged, lowering the net amount of new cash the funds took in.

That was borne out by July cash flow data reported Wednesday by the Investment Company Institute, the funds’ chief trade group.

The ICI said stock funds took in net new cash of $6.2 billion in July, down from $14.5 billion in June and the lowest since January 1995.

But total purchases of stock funds in July were $35.7 billion, down only slightly from $36.9 billion in June. What hurt the funds was a big jump in the level of redemptions, as some investors chose to take profits. Redemptions and exchanges out of stock funds totaled $28.8 billion in July, up from $20.1 billion in June.

This month, many fund companies say, purchases have either revived or stayed strong, while redemptions have fallen as the stock market has rebounded and, lately, been relatively calm.

Major firms including Fidelity Investments, T. Rowe Price, Strong Funds and John Hancock say stock fund net inflows are much higher this month than in July, though still below spring records.

Fidelity said it expects stock fund net purchases will exceed $1 billion in August, contrasted with net redemptions of more than $500 million in July.

Vanguard Group estimated that net stock fund purchases will total about $1.6 billion this month, up from $1.5 billion in July.

Investors who buy and sell mutual funds through brokerage Charles Schwab have purchased a net $681 million worth of domestic stock funds so far in August, contrasted with net withdrawals of $754 million in July, the company said.

Bond funds, meanwhile, continue to attract little interest. Bond funds had net outflows of $1.04 billion in July, the ICI said.

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Lower Flows

Net new cash flow into stock mutal funds fell in July to the lowest level since January 1995, as redemptions soared. Monthly inflows, in billions of dollars:

1996: $6.2

Source: Investment Company Institute