Mutual Fund Buyers Returned to Stocks
By THEO FRANCIS
Staff Reporter of THE WALL STREET JOURNAL
Mutual-fund investors dipped their toes back into calming stock-market waters last month, putting $21 billion of net new money into funds that invest in stocks, according to Lipper Inc.
The show of confidence followed a shaky March, in which investors pulled out a record $20.6 billion more than they put into stock funds. And April's resurgence of confidence was followed by big inflows this month as well, according to several mutual-fund companies' preliminary estimates.
"There's a sense that the economic environment may be improving and that the worst of the market decline is behind us," said Steve Norwitz, a spokesman for T. Rowe Price Associates, of Baltimore. "Even though there's still a lot of risk, the [stock-market] rebound in April buoyed investor confidence."
The Standard & Poor's 500-stock index declined 6.4% in March but climbed 7.7% in April. So far this month, it has gained 3.2%.
Mr. Norwitz said 33 of the 35 stock funds at T. Rowe are drawing net new money or have held level in terms of assets for the month of May. He added that T. Rowe's stock funds enjoyed a strong April in which investors put several hundred million dollars of net new money into the funds. In May so far, investors are on pace to put about half as much new money in as last month.
"Value" funds that look for low-priced stocks are proving the most popular of late, according to the study released Wednesday by Lipper. Such funds, which trailed badly in the late 1990s and then recovered handsomely in the past 12 months, drew $6.2 billion in net new assets during April, Lipper said. A separate report prepared by analysts at Salomon Smith Barney showed the trend helped value-oriented fund firms in April including Franklin Resources Inc., Capital Research & Management's American Funds and Vanguard Group.
But funds specializing in fast-growing companies and technology stocks also drew new assets in April, as many of those stocks rebounded quickly after drastic declines in late 2000 and during the first quarter. Investors in April put $4.9 billion in net new assets into growth funds and $600 million into technology specialty funds, Lipper said.
At Fidelity Investments, investors started putting more money into stock funds in the beginning of April, and the trend is continuing more strongly this month, said Anne Crowley, a spokeswoman for the closely held Boston firm. This year through March, investors overall had pulled money out of Fidelity stock funds, while putting money into more stable bond and money-market portfolios.
In April though, investors put $2.3 billion of net new money into Fidelity stock funds and pulled about $1 billion out of its money-market funds, Ms. Crowley said. According to Lipper, investors tapped money funds in April to help pay tax bills.
WAITING ONLINE: A T. Rowe Price effort to simplify life for online customers instead snarled its tech-support lines with frustrated callers.
On Sunday, T. Rowe unveiled a revamped Web site allowing customers to use a single account-name to access any combination of brokerage, retirement-plan and retail accounts. Previously, separate logins were required for each type of account. With the new system, everyone logging on was asked to create a new login or reaffirm their previous login, including customers with just one kind of account.
The result: Call volumes at T. Rowe's 16-person technical support center on Monday rose by 30%, the fund group said. A spokesman said delays ranged as high as 20 minutes; telephone calls to T. Rowe's shareholder-services center weren't delayed.
"It was extremely frustrating and annoying," said Michael Prestigiacomo, a Boston printing-company sales representative, who trades stocks and options about once a week. He said he failed to reach technical support Monday despite calling three times and holding for 45 minutes each time. Calls to the brokerage firm's main service line were answered promptly, he said, but employees there were unable to help him log in.
"In fairness, the representative offered to let me trade at the Internet rate" rather than the higher phone rate, Mr. Prestigiacomo added.
Call volumes fell Wednesday, but "some delays" continued, spokesman Brian Lewbart said.
Money Funds Report Record Net Inflow
A record $30.77 billion flowed into money-market funds in the week ended Tuesday, bringing net assets to $2.045 trillion, according to Money Fund Report, a newsletter.
The surge in inflows came from institutional investors, who stashed a net $31.74 billion into taxable money-market funds in an attempt to avoid the most recent cut in interest rates, said Peter Crane, managing editor of the Money Fund Report.
Taxable money-market funds are considered temporary havens from interest-rate cuts because of their long maturity of about 52 days. As a result, assets in those funds yield the more appealing returns of former rates. The Federal Reserve cut key federal-fund rates by half a percentage point to 4% on May 15.
Despite the lag in money-market funds' yields, the latest reduction in interest rates has dropped the groups' average yields to their lowest levels since 1994, Mr. Crane said. Additionally, as yields in the next few weeks catch up with the rest of the market, inflows into money-market funds should slow, Mr. Crane said.
Overall, institutional investors were responsible for most of the inflows, investing $32.56 billion, while retail investors withdrew a net $1.79 billion.
Taxable money funds saw net inflows of $28.72 billion, as institutional investors placed $31.74 billion into funds, and retail investors withdrew $3.02 billion.
The average seven-day simple yield on taxable money funds fell to 3.85% from 4.06%, while the average seven-day compound yields dropped to 3.92% from 4.14%, the newsletter reported.
Thirty-day simple yields fell to 4.09% from 4.22%, while 30-day compound yields declined to 4.17% from 4.31%. Compound yields assume reinvestment of dividends.
Average maturity of the taxable funds' investments, which include commercial paper (short-term corporate IOUs) and Treasury bills, stayed at 52 days.
-- Dow Jones Newswires
Write to Theo Francis at theo.francis@wsj.com1 |
