Mutual Funds Set Record for New Cash in January

A record of more than $140 billion in net new cash was invested in U.S. mutual funds during January, fueled by a huge inflow into money market funds, a report issued Thursday said.

All asset classes had positive flows, according to estimates by the fund industry consulting firm Strategic Insight, which said money funds took in about $104 billion last month.

Stock funds garnered about $30 billion, down from $40 billion a year earlier but up from $11.6 billion in December, said the New York-based firm. Bond funds attracted about $8 billion, as investor interest in junk funds picked up.

“The extraordinary commitment of fund investors, reflected in their purchasing and retention patterns, is quite reassuring,” said Avi Nachmany, research director at Strategic Insight. “This is especially comforting when you take into consideration the tumultuous fourth quarter and lingering uncertainty in 2001.”

The Investment Company Institute, the industry’s trade group, will issue official January figures for stock and bond funds at the end of this month.

In a separate report Thursday, the ICI said assets of U.S. money market funds rose $14.68 billion to a record $2.03 trillion in the week ended Wednesday.

The cash stockpile in money funds could help propel a new stock market rally, analysts note--but so far, of course, it hasn’t.

January’s big net inflow into money funds was fueled mainly by institutions, not “defensive” individual investors, according to Strategic Insight, as those managers sought temporarily higher-yielding money funds in a declining short-term interest rate environment.

Investor interest in stock funds could be ebbing, however, according to another firm that estimates mutual fund flows. Santa Rosa, Calif.-based Trimtabs.com said this week that stock funds in February could see their first monthly net outflow since August 1998, when $11.6 billion came out.