Stock Fund Cash Flow Gains Again

Investors added $18.7 billion more to U.S. stock mutual funds in June than they withdrew, the biggest amount in more than a year, the Investment Company Institute said Wednesday.

The flood of cash into stock funds appeared to continue in July, but at the expense of bond funds, which estimates indicate are continuing to show net redemptions as investors chase higher returns in stocks and flee the abrupt turnaround in fortunes in the bond market.

Inflows into stock funds increased in June for the third straight month following the stock market rally that began in March.

In contrast, net flows into bond funds declined for the second consecutive month and were the lowest since December 2001, the Washington-based fund industry trade group said.

Investors haven’t added so much to stock funds in a month since March 2002, when they poured in $29.6 billion. The Standard & Poor’s 500 index gained 15% in the second quarter, its largest quarterly advance since 1998.

Flows appear to be holding steady in July, fund research service Trimtabs.com said. It estimated investors would add $11.6 billion to equity funds in July.

However, officials at Fidelity Investments and Vanguard Group, the two biggest mutual fund companies, said investors withdrew money from bond funds this month and added to stock funds.

“The interest rate spikes have been sending some bond investors to the exits,” said John Woerth, a spokesman for Vanguard in Valley Forge, Pa. Vanguard had a $1.9-billion outflow from bond funds in July, while stock funds gained $2.8 billion and money markets gained $1 billion, he said.

At Boston-based Fidelity, bond fund outflows in July were “notable,” spokeswoman Anne Crowley told Bloomberg News.

So far this year, stock funds have added $35.5 billion from customers. Taxable bond funds have taken in a net $65 billion and so-called hybrid funds, which invest in both stocks and bonds, have received $12 billion.