Stock Funds’ Cash Intake Rebounds

After slowing in May as the stock market turned dicey, cash flows into U.S. stock funds have rebounded in June as blue-chip stocks have hit new highs, many fund companies say.

Bond funds also continue to gain in popularity with investors, as some look to diversify stock-heavy portfolios, experts say.

An estimated $21.1 billion in net new cash has gone into stock funds this month, up from $18.7 billion in May, according to Trim Tabs Financial Services, which tracks flows.

The May figure, reported by the Investment Company Institute on Monday, was down 29% from an inflow of $26.5 billion in April.

In June, “the pace of stock fund buying really took off after a rocky beginning to the month, set off by the market’s rise,” said Carl Wittnebert, Trim Tabs’ research chief.

The benchmark Standard & Poor’s 500 index has gained 4.4% this month and closed Monday at a record high.

Many of the biggest fund companies, including Fidelity Investments, Charles Schwab Corp., T. Rowe Price Associates Inc. and Scudder Kemper Investments Inc. are reporting higher net purchases of stock funds in June.

Many, including Vanguard Group and Schwab, also are reporting higher bond fund inflows.

Bond funds are gaining popularity relative to past years. About $9.8 billion was invested in taxable bond, municipal bond and so-called hybrid funds in May, up from $5.24 billion in April, according to ICI, the funds’ trade group.

“The roller-coaster [stock] market is sparking renewed interest in bond funds,” said Tony D’Amato, director of retail marketing at Milwaukee-based Strong Capital Management Inc. “It started in May and it continued in June.”

Vanguard, the second-biggest fund company, expects its stock funds to attract $2 billion in June, while about $1 billion will go into bond and balanced funds, said spokesman John Demming.

“Investors do seem to be getting more cautious with the allocation of their assets,” Demming said.

The flows to stock funds in May were boosted by the movement of a chunk of money from banks’ common trust funds, the ICI reported. About $5.3 billion, or 28%, of the money invested in stock funds in May was converted from common trust funds.

Some stock fund managers, meanwhile, may be getting more cautious: At the end of May, the average stock fund had 4.4% of assets in cash, up from 4.2% at the end of April, which was the lowest level since December 1972.