ETFs Lead Big Jump in November Fund Inflow

Strong investor demand for exchange-traded funds led a sharp jump in mutual fund purchases in November, new data show.

Stock and bond funds had a net inflow of $29.1 billion in November, up from $12.4 billion in October, Financial Research Corp. estimated on Tuesday.

The pickup in demand reflected surging stock markets worldwide last month. The U.S. Standard & Poor’s 500 index rose 3.5% in November.

As more investors jumped into equity markets, many favored exchange-traded funds, or ETFs, over conventional mutual funds. Barclays Global Investors and State Street Corp., both major sponsors of ETFs, ranked first and second, respectively, in net cash inflows last month.

Barclays took in $7.1 billion, Financial Research estimated. State Street took in $6.4 billion.

ETFs are baskets of stocks or bonds and trade on major exchanges, allowing investors to buy or sell anytime during the trading day. Most mutual funds, by contrast, are priced just once each day, at the close of trading.

ETFs track specific market indexes -- including broad indexes such as the S&P; 500 and much narrower indexes covering individual industries or market niches -- and typically have low management fees. Their features have made them popular with individual investors as well as with institutions.

The best-selling fund in November was State Street’s SPDR Trust ETF, which tracks the S&P; 500. It took in $5.5 billion for the month, Financial Research estimated.

Among conventional mutual funds, the Los Angeles-based American Funds group had the largest cash inflow in November, totaling $5.7 billion. That was up from $5.4 billion in October but down from $8.1 billion in November 2004. American Funds still leads the industry in cash intake this year, with net inflows of $72.2 billion through November. But its sales pace has slowed from $82.1 billion in the same period of 2004.