Stock Fund Inflows Rise
Investors warmed up to stock mutual funds in November with net purchases of $14.9 billion, an industry trade group said Thursday, but there are signs the revived affection for stocks may be cooling a bit.
The Investment Company Institute said net cash flow into stock funds--that’s new purchases minus money pulled out of funds by investors--exceeded October’s revised inflow of $923 million. The October net purchases previously were reported at $758 million.
It was the second consecutive month of positive cash flow to stock funds after net withdrawals from July through September. November’s activity was accompanied by a rebounding stock market, with the Dow industrials gaining 8.6% and the Nasdaq composite advancing 14.2%.
Even with the rebound, net inflows to stock funds are running at only about 10% of last year’s levels. And more recent data indicate that the surge in money flowing into stock funds already may be reversing. TrimTabs.com Investment Research, of Santa Rosa, Calif., calculates that stock funds could see an outflow of $1.3 billion this month based on a projection of activity through Dec. 24.
The chief culprits are funds that invest in international stocks, which are on track for a $3.4-billion outflow this month, according to Trimtabs. Funds that invest in U.S. stock are on pace for a $2.1-billion inflow in December, according to the firm.
Investors are showing a greater appetite for risk, however, pushing more money into aggressive stock funds while pulling money out of more-conservative bond funds. So-called aggressive growth funds have taken in the heaviest inflows in the last two weeks, while growth and growth-and-income funds have seen flat flows or outflows. According to a separate report from AMG Data Services of Arcata, Calif., funds that invest in the shares of small companies also have been popular choices recently.
Meanwhile, after November’s small net inflow, bond funds are on pace for a $4-billion outflow this month, TrimTabs estimates.
According to the ICI’s figures, stock funds that invest in U.S. securities had an inflow of $13.1 billion in November compared with an inflow of $5.2 billion in October. Stock funds investing in foreign issues had an inflow of $1.9 billion compared with an outflow of $4.3 billion in October.
Bond funds had an inflow of $6.6billion, down from an inflow of $13.5billion in October. Of these, taxable bond funds had an inflow of $5.7billion, compared with a revised inflow of $11.6billion a month earlier, and municipal bond funds had an inflow of $850 million, compared with $1.9 billion a month earlier.
Money market funds had an inflow of $60.2 billion in November, compared with an inflow of $73.85 billion in October. Most of the inflow was in funds offered primarily to institutional investors such as corporations.
Cash levels of stock funds were 5.6% of assets in November, unchanged from October and down from 6.5% in November 2000.
Vanguard Group, the second-largest U.S. fund company, led the industry in net sales of stock and bond funds in November, according to a report by consulting firm Financial Research Corp. Vanguard’s sales last month totaled more than $3 billion, boosting the year-to-date figure to $33.6 billion.
The best-selling individual fund in November was L.A.-based American Funds’ Growth Fund of America, with net sales of $751 million, FRC said. The fund is down 13.5% for the year through Dec. 26.
On a year-to-date basis, the Pimco Total Return fund, managed by Pacific Investment Management Co. in Newport Beach, is the best-selling fund, with $7.8 billion in net sales. The fund invests in intermediate-term fixed-income securities. Its A-class shares have returned 7.9% year to date through Wednesday.
