Stock-Fund Cash Inflows Slow in March
Investors toned down their purchases of stock mutual funds in March as the market struggled for much of that month, according to data reported Monday by research firm Lipper Inc.
Still, net cash inflows to stock funds in the first quarter appear to have been the biggest since the first quarter of 2000 -- when the last bull market peaked.
A separate report Monday showed that Los Angeles-based American Funds group continued to dominate the list of bestselling funds in March, as it did for much of 2003.
Lipper estimated that stock funds overall took in net new cash of $23.3 billion in March. Net new cash flow measures new purchases minus redemptions.
By contrast, the funds took in $26.2 billion in February and $43 billion in January, according to previously reported data from the Investment Company Institute, the funds’ chief trade group in Washington.
The institute is expected to report official March data later this week.
“Choppy and slightly down-trending stock prices, the Spanish railway bombing, recurring bad news from Iraq and concerns over rising interest rates combined to cool equity-funds buyers’ ardor for making current purchase decisions,” said Lipper’s senior research analyst, Don Cassidy.
Despite the March slowdown, total inflows to stock funds in the first quarter were about $93 billion if Lipper’s March estimate was correct. That would make the quarter the biggest for stock funds since the first quarter of 2000, when the net inflow totaled $140 billion.
But at the market’s previous peak, the most popular stock funds were high-risk technology funds and other “aggressive growth” funds.
This year investors are favoring “defensive”-type funds, such as those that stress value, a balanced (stock and bond) style or dividend income. Those funds surged to popularity in the wake of the deep market decline from 2000 through 2002.
The American Funds family, operated by Capital Group, primarily markets lower-volatility funds that focus on blue-chip stocks and favor a value-investing style.
American had six of the 10 bestselling funds in the first quarter, according to Financial Research Corp. of Boston.
At the top of the list: Growth Fund of America, which took in $6.78 billion in net new cash in the quarter, Financial Research said.
Bond mutual funds had net inflows of $5.2 billion in March, compared with virtually no net inflow in February, Lipper said. Investors were favoring funds that own shorter-term bonds and those that own inflation-protected Treasury bonds, the firm said.
Inflation worries have been rising as the economy has accelerated.
Another fund that was a big seller in the first quarter: Pimco Commodity Real Return, which invests in commodity-linked derivative securities and inflation-protected bonds. Commodity prices have soared over the last year, though they have pulled back recently.
Lipper said mutual fund companies implicated in the industry scandal involving alleged trading abuses continued to suffer net cash outflows in March.
The 17 firms named in the scandal -- including Putnam Investments and Janus Capital -- had overall net asset outflows of about $12 billion in March, down from $14 billion in February, Lipper said.
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Bestselling funds
Mutual funds managed by the Los Angeles-based American Funds group continued to lead the industry in net cash inflows in the first quarter.
*--* Bestselling funds, (net inflows, Jan. through March in billions of dollars) American: Growth Fund of America $6.78 American: American Balanced $3.81 Dodge & Cox Stock $3.65 American: Income Fund of America $3.05 American: Capital World Growth & Income $2.95 Vanguard Total Stock Index $2.92 American: Capital Income Builder $2.8 American EuroPacific Growth $2.69 Fidelity Diversified International $2.22 Pimco Commodity Real Return $2.2
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Source: Financial Research Corp.
