Scandal-Free Fund Firms Attract Most Fresh Cash
Mutual fund companies that have largely avoided taint from the industry’s scandals continued to attract the lion’s share of investors’ fresh cash in December, new data show.
Los Angeles-based American Funds took $8.5 billion in net new money into its stock and bond funds last month, boosting its total for all of 2003 to $65.6 billion -- a record for any fund firm in a calendar year, according to estimates reported Wednesday by fund tracker Financial Research Corp. in Boston.
Rounding out the top four companies for net cash inflows in December, and for the year, were Fidelity Investments of Boston, Vanguard Group of Valley Forge, Pa., and Pimco Funds of Newport Beach.
Net inflows measure new purchases minus redemptions, or sales by existing investors.
Federal and state regulators are looking into various practices of nearly every major fund company, including American Funds, Fidelity, Vanguard and Pimco. But those four haven’t been at the center of the investigations into trading abuses, such as “market timing,” that have rocked the industry since September.
At the same time, the four giants have benefited from their generally conservative reputations in managing stock and bond portfolios over the long term, analysts say. Many fund investors who have nervously returned to financial markets over the last year have chosen to play it relatively safe.
“Those funds have built up a lot of chips with investors” over time, said Russ Kinnel, director of fund analysis at Morningstar Inc. in Chicago.
Other companies that attracted significant net cash inflows in December included Santa Monica-based Dimensional Fund Advisors, which took in $2.9 billion, and San Francisco-based Dodge & Cox, at $2.6 billion, according to Financial Research.
Dimensional Fund Advisors and Dodge & Cox both have a reputation for low portfolio management costs. Fund expenses have become a major issue as regulators focus on industry practices.
At the other end of the spectrum in terms of cash flows, Boston-based Putnam Investments had the largest net cash outflow from stock and bond funds in 2003, totaling $28.9 billion, according to Financial Research’s estimates.
Putnam was the first fund company charged with wrongdoing in the fund-trading scandal. It has since agreed to wide-ranging reforms, and on Tuesday the company said it would reduce its fund expenses in an attempt to woo back investors.
Investors pulled a net $4.7 billion from Putnam in December, down from $13 billion in November, Financial Research estimated. A Putnam spokeswoman declined to give a figure for January, but said “the trend in flows for Putnam has continued to significantly improve.”
Janus Capital Group of Denver, which also has been implicated in the trading scandal but hasn’t been charged with wrongdoing, suffered a net outflow of $2.8 billion from its stock and bond funds last month and $15.2 billion in 2003, according to Financial Research’s estimates.
The most popular stock fund last year was the Growth Fund of America, managed by American Funds. The fund, which took in a net $13.9 billion in 2003, had total assets of $65.8 billion at year’s end. The fund’s return was 32.9% in 2003, beating the blue-chip Standard & Poor’s 500 index’s 28.7% gain.
