Investing November 20, 2001

Appetite for Stock Funds Returns

November 20, 2001 (PLANSPONSOR.com) - After three months of net withdrawals, equity mutual fund sales finally outweighed redemptions - with investors pouring $1.6 billion into equity funds in October as the equity markets recovered, according to estimates from Lipper.
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In comparison, data from September show that investors withdrew some $32 billion from stock mutual funds. In addition, stock funds experienced net outflows in February and March, before turning positive in the April-June period and then resuming negative flows from July until September.

Industry Leader Inflows

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According to industry members, demand remains strong into November, with heavyweights Vanguard, T Rowe Price and Fidelity all reporting buoyant sales.

In October:

  • the Vanguard Group saw inflows of $2.0 billion into stock funds in October, primarily index and value oriented products, while bond funds took in $2.2 billion,
  • Fidelity had net flows of $600 million into its stock funds, $1.2 billion into bond funds and $1.6 billion into money funds
  • though not mentioning figures, T Rowe Price reported strong inflows into both equity and fixed income funds

According to Lipper, the average diversified stock fund gained 3.81% over the month. In comparison,

  • the Dow Jones Industrial Average gained 2.6% in the month,
  • while the Nasdaq increased by 12.8%

Fixed Income and Money Market

October was also a bumper month for bond funds, which saw inflows of $12.5 billion, the second highest in 2001, after August’s $15.4 billion. On a year-to-date basis, fixed income inflows, at $73.5 billion, are triple the amount of equity funds, which are estimated at $21.4 billion, according to Lipper.

Money market funds attracted $73.5 billion in October, higher than the same period in the last four years and 2001 second-highest intake since January’s $99 billion.

In terms of market cap, investors gravitated towards small cap fund while in terms of investment style they shied away from aggressive strategies, betting on value buys instead.

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