Negative Fund Flow Foreseen for ’02
For U.S. mutual funds, 2002 is shaping up as the first calendar year since 1988 that withdrawals from stock funds exceed purchases, a fund industry trade group said Thursday.
U.S. stock mutual funds took in a net $6.5 billion in November, reversing a five-month stretch when outflows exceeded inflows, the Investment Company Institute reported. The return to positive flows came as the U.S. stock market posted solid gains in November for the second consecutive month.
For the first 11 months of 2002, stock funds had net outflows of $19.9 billion, according to the ICI. In the same period in 2001, stock funds posted inflows of $29.1 billion.
December could see a return to outflows for stock funds. TrimTabs.com, a Santa Rosa, Calif., data firm, estimated the current month will see outflows of $5.2 billion, based on a projection of activity through Dec. 23.
At that rate, stock mutual funds will post negative money flows for the year, the first time since investors started pulling money out of stock funds after the October 1987 crash.
Investors have yanked money out of stock funds as major market indexes tumbled during the first half of the year, and took another steep dive in September and early October. Through Thursday, the Standard & Poor’s 500 index was down 22.5% for the year and was headed for its third-straight losing year.
Although investors withdrew more from stock funds than they put in this year, bond funds are generating record sales.
Bond funds took in a net $7.7 billion in November, the ICI said. For the year through November, bond funds have seen inflows of more than $133 billion. The previous record for net flows into bond funds was $102.6 billion in 1986.
In November, investors added a net $7.9 billion to taxable bond funds while they withdrew a net $164 million from municipal bond funds.
Money market funds had inflows of $127.6 billion in November, reflecting activity by institutions. Money market funds sold primarily to individuals had outflows of $7.3 billion.
Financial Research Corp., a Boston research and data firm, calculated that American Funds was the best-selling fund group in November, with $3.2 billion of net inflows. The company’s Growth Fund of America led all stock and bond funds with net sales of $647 million.
Newport Beach-based Pimco Total Return Fund, which invests in fixed income securities, was runner-up with monthly sales of $616 million, FRC said. For the year to date, Pimco Total Return was the bestseller with $13.6 billion in net inflows.
At Fidelity Investments, the largest U.S. fund company, a spokesman said its major asset classes have all generated inflows this month. In November, Fidelity had inflows of $1.5 billion for its equity funds, $700 million for its bond funds, and $4.6 billion for money market funds.
Industrywide, stock fund portfolio managers bought a net $1.2 billion of stocks in November, compared with sales of $13.3 billion in October, according to the ICI data. Cash levels at stock funds were 5% of assets in November, compared with 5.1% in October and 5.6% a year ago.
Assets of stock funds rose 6% to $2.82 trillion. Assets of funds of all types, including money market funds, rose by 5% to $6.56 trillion.
The ICI data is based on reports of sales activity from most of the fund industry. The ICI figures differed from those of several data firms that have estimated inflows in November.
