Stock Funds See Cash Flows Improve

Many stock mutual funds are again attracting more buyers than sellers, after five months of net redemptions. But investors’ mood remains cautious despite Wall Street’s rebound since early October, some fund firms say.

Major fund companies including Fidelity Investments and Vanguard Group said Tuesday that their stock funds have attracted more net new investment in November than in any month since April. Vanguard said its equity funds have taken in a net $1 billion this month.

But another fund giant, T. Rowe Price Associates, said that net new investment from small investors in November was just “modestly positive.”

Any net inflow would be an improvement from the June-to-October period, when the industry suffered heavy redemptions amid the stock market’s plunge to five-year lows.

The Investment Company Institute, the funds’ main trade group, said Tuesday that stock funds had a net cash outflow of $7.7 billion in October, bringing the total of net redemptions to nearly $98 billion for the five-month period.

The recent streak of net redemptions has been the longest since 1988, when investors continued to cash out of equity funds after the October 1987 market crash.

But as a percentage of total stock fund assets, the net redemptions have been relatively small this year. Stock fund assets totaled $2.66 trillion as of Oct. 31, the institute said.

The rebound in share prices since early October naturally is helping to encourage more investors to put money to work in mutual funds, analysts said. The Dow Jones industrial average is up 19% since Oct. 9, though the market was hit by profit taking on Tuesday.

In October, investors continued to favor bond mutual funds over stock funds: A net $6.3 billion flowed into bond funds in the month, according to the institute. That was down from $15.4 billion in September.

Funds that own high-quality bonds have been a safe haven for investors this year, as falling market interest rates have boosted the value of older bonds.

Year-to-date through October, bond funds’ net cash inflow totaled nearly $126 billion, while stock funds suffered a net outflow of $26.5 billion.

Money market mutual funds had a net inflow of $11.2 billion in October, but the funds had a net outflow of $146 billion for the 10 months, as interest rates fell and investors moved cash into other investments, including bonds and real estate.