Investors Flock to Bond Mutual Funds

The “bond bug” is biting more individual investors, inflows to mutual funds show.

The net cash inflow into bond funds totaled $10.36 billion in November, up from $3.74 billion in October, the Investment Company Institute reported on Monday.

If December bond fund purchases stayed on the same pace, fourth-quarter bond fund inflows may have been the best in four years.

The ICI, the chief trade group for mutual funds, said the November inflow figure was skewed by a one-time gain of $4.3 billion from bank trust funds that converted to mutual funds.

Still, even excluding that sum bond funds received about $6 billion in net new cash in November, a robust figure for a fund category that investors have by and large been shunning since 1993.

Through November, bond fund inflows totaled $39 billion versus just $10.3 billion in the same period of 1996.

Stock funds, meanwhile, had net cash inflows of $18.1 billion in November, the ICI said. But excluding bank-trust conversions the total was $12.7 billion--the smallest inflow since March.

The ICI noted that investors often postpone stock-fund purchases near year-end for tax-related reasons.