Fund Inflows Drop Amid Market Volatility

U.S. stock mutual funds took in a net $17.3 billion in new money in September, down from a revised $24.0 billion in August, the Investment Company Institute said Monday. And there are signs that the slowdown deepened in October.

Despite the arrival of new money, September also saw stock fund assets decline amid volatile stock markets, with combined assets of all types of funds also slipping during the month.

On a quarterly basis, cash inflows to stock funds continued to decline from the record pace earlier in the year, as investors turned more cautious. The third-quarter inflow fell to $58.6 billion from about $73 billion in the second quarter and a record of about $134 billion in the first quarter, according to the ICI, the fund industry’s trade group.

Some private forecasting services believe October could see the first net outflows from stock funds since August 1998. Trim Tabs.com of Santa Rosa calculates that based on activity through Oct. 26, stock funds had a net outflow of $9.6 billion for the month.

Compared with August, assets of stock mutual funds fell during September’s volatile markets by $182 billion, or 4%, to $4.4 trillion.

The ICI said net cash flow to aggressive growth funds fell to $5.91 billion in September from August’s $8.41 billion. Growth funds took in a net $9.16 billion compared with $12.24 billion in August. Stock funds that invest abroad took in a net $1.52 billion compared with the previous month’s inflow of $3.70 billion.

Even though bonds have outperformed many stock market indexes this year, investors continue to pull money from bond funds. Taxable bond funds had a net outflow of $1.7 billion in September, compared with the outflow of $1.33 billion in August. Municipal bond funds had a net outflow of $1.37 billion in September, compared with $515 million in August.

Money market funds had an outflow of $8.32 billion compared with an inflow of $22.46 billion in August.