November Inflows Positive Despite Stock Sell-Off

Mutual fund investors appear to be taking the stock market’s sell-off in stride, although there are some signs of a shift toward more staid choices.

Representatives at Vanguard Group, T. Rowe Price Associates, Charles Schwab and Van Wagoner Funds said Monday that November cash flows are positive thus far and call centers have reported no meaningful pickup in activity. Fidelity Investments said its stock funds had a positive cash flow last week, though the firm does not release month-to-date figures.

Although the latest estimate from TrimTabs.com, which tracks industry trends, showed that U.S. equity funds had a net outflow of $3.3 billion in the three-day period ended Thursday, those funds are still on track for a net inflow of more than $10 billion during November, according to the Santa Rosa-based firm.

“The preliminary indication is that people are not panicking,” said Carl Wittnebert, director of research at TrimTabs, who labeled last week’s three-day net outflow “fairly modest,” given the severity of recent market downswings.

He noted that funds TrimTabs classifies as growth and income have caught up to riskier aggressive growth funds in popularity this month, taking in equal amounts.

Arcata, Calif.-based AMG Data Services, which also estimates industry trends, said equity funds took in a net $692 million in the week ended Wednesday, modest by recent standards.

“There has been more of an allocation to defensive funds and selective sectors with strong performance, namely health care and biotech,” said Bob Adler, AMG president.

At Vanguard, whose funds tend to appeal to conservative investors, “We’ve seen a return to the tried and true,” said spokesman Brian Mattes.

In the last month, for example, Vanguard’s value funds, which hold stocks that have low valuations based on such criteria as price-to-earnings ratios, have had net inflows in the aggregate after a period of net outflows, he said. The firm’s bond funds and stock index funds have also become increasingly popular, Mattes said.

But some fund companies said aggressive choices remain in vogue.

At Van Wagoner, whose technology-oriented, high-octane funds are at the other end of the spectrum from Vanguard, Managing Director Peter Kris said “people have not been reacting negatively at all to this market.” A taxable capital gains distribution Friday at the flagship Van Wagoner Emerging Growth fund produced virtually no reaction from investors, he added.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Tough Acts to Follow

This year’s market downturn may be giving some mutual fund investors a costly lesson in performance chasing. Of last year’s 10 hottest funds, only two from Van Wagoner have fared better than the blue--chip Standard & Poor’s 500 index so far this year, through Friday.

*--*

1999 2000 Assets Fund return return* (in millions) Nicholas-Applegate Global Technology +493.7% -19.0% $253 MAS Small Cap Growth +313.9 -10.9 439 Van Wagoner Emerging Growth +291.2 +7.7 1,329 Nevis Fund +286.5 -10.2 186 Monument Internet +273.1 -46.3 79 Amerindo Technology +250.6 -46.1 380 PBHG Technology & Communications +243.9 -19.9 2,757 Van Wagoner Post-Venture +237.2 -6.9 763 ProFunds Ultra OTC +233.3 -56.6 830 Van Wagoner Technology +223.8 -3.3 642 Average of 10 funds +284.7 -21.2 S&P; 500 index +21.0 -6.2

*--*

* Through Friday

Source: Morningstar Inc.