Stock Fund Inflows Off 33% in February

The U.S. mutual fund industry on Thursday estimated that $19.5 billion in fresh cash flowed into stock funds during February, the seventh-largest monthly total on record.

The net new investments in equity were down about 33% from January, when a record $29.1 billion went into stock funds, according to the Investment Company Institute, the industry’s trade group in Washington.

Many of America’s biggest fund companies, including Vanguard Group, T. Rowe Price Associates Inc., Janus Capital Corp. and Scudder, Stevens & Clark Inc., said last month’s equity fund inflows were lower than those for January.

Early indications are that March inflows will pace February levels, with investors allocating an increasing percentage of their assets to less-risky stock funds.

Ironically, however, the blue-chip growth-and-income funds that many investors have been favoring could be hit the worst in coming weeks, if the slump in big-name stocks that occurred Thursday continues. The Dow Jones industrials plunged 2.3%, or 160 points.

Meanwhile, the ICI said bond funds took in just $2 billion in new cash in February, down from $3.4 billion in January.

Bond fund share values will erode if market interest rates continue to rise.