Stock-Fund Redemptions Hit $19 Billion in March
By AARON LUCCHETTI
Staff Reporter of THE WALL STREET JOURNAL
Droves of fed-up investors pulled money out of stock mutual funds in March, according to estimates by two data-tracking firms, but several fund firms say April's stock-market rebound has inspired renewed buying.
Investors withdrew a net $19 billion from stock funds in March, according to Strategic Insight, a New York consulting firm. Using somewhat different criteria, Lipper Inc., a Reuters Group PLC subsidiary in New York that also tracks mutual funds, estimated that investors yanked a net $15 billion out of stock funds.
"When the market moves in one direction, people follow," Don Cassidy, senior research analyst for Lipper, said of the March withdrawals. "It was an uncomfortable month, but it could have been worse."
The Investment Company Institute, a Washington, D.C., trade group that collects sales information directly from fund companies, is expected to come out with its more-definitive calculations of investors' deposits and withdrawals this week. Lipper and Strategic Insight estimate net movements in and out of mutual funds based on the funds' total net assets and their recent market performance.
While only estimates, the figures from these fund-tracking firms provide some evidence that the stock-market doldrums of the previous 12 months have taken a toll on investors. Through January, many individual investors continued stuffing net new money into stock funds despite steep declines in their portfolios, especially those more heavily-weighted in technology and telecommunications companies.
That changed in February, as investors redeemed a net $3 billion of stock funds, the first month of net redemptions in more than two years. The March estimates, if confirmed, would be the largest net redemptions from stock funds on record, greater than the net $11.6 billion that left in August 1998 and the $7.48 billion that flowed out of stock funds in October 1987.
Even so, compared with the vast holdings in stock funds today, the movement out is more migration than exodus. Based on the estimates, only about 0.5% of the $3.7 trillion in stock-fund assets was withdrawn from portfolios last month, roughly equal with the percentage that bailed out during the Russian debt crisis of summer of 1998 and far short of the 4% of net money that left stock funds amid the market crash of October 1987.
"We expected some redemptions after months of troubled performance," said Avi Nachmany, head of research for Strategic Insight. "In the end though, it's very much within the comfort zone with what we have seen before."
April has brought renewed confidence from investors, thanks in no small part to a stock-market rally and last week's surprise Federal Reserve interest-rate cut.
Also, with the April 16 tax deadline having passed, investors no longer need to sell stock funds to pay tax bills, says Charles Biderman, president of TrimTabs.com, a Santa Rosa, Calif., market-research firm. Mr. Biderman projects that stock mutual funds will pull in a net $9 billion in new assets in April, based on movements into stock funds through last week.
Vanguard Group, the large Malvern, Pa., mutual-fund firm is "continuing to receive net new inflows into all types of funds" in April, a spokesman said.
T. Rowe Price, of Baltimore, also said it is enjoying "pretty strong cash flows" into stock funds in April after net redemptions in March. "It has turned around quite a bit this month," said Steve Norwitz, a T. Rowe spokesman.
Nevertheless, Mr. Norwitz added that the company plans to cut its 4,078-person staff by several dozen people in coming weeks, primarily in shareholder services, as it deals with lower asset levels. Putnam Investments, a unit of Marsh & McLennan Cos., of New York, and Janus Capital, a unit of Stilwell Financial Inc., of Kansas City, Mo., also recently announced staff cutbacks stemming from the recent stock-market decline.
If the rebound in investor sentiment is snuffed out during the last week of April, stock-fund redemptions could extend to a third month, making the current stretch of net redemptions the longest since the fourth quarter of 1988. The stock-fund tallies in February and March were the first consecutive months of net redemptions since September 1990.
In March, according to the Lipper numbers, investors leaned more toward conservative investments, putting net new money into bond funds and less volatile "value" oriented stock funds, which invest in companies that have cheap stock prices relative to their earnings.
Money-market funds posted weaker results, as many institutions and corporations pulled assets out for tax-related reasons, said Lipper's Mr. Cassidy. Growth funds, which invest in companies expected to exhibit faster-than-average earnings gains, and sector-oriented funds, including technology, were among the fund types losing the most assets, he added.
Write to Aaron Lucchetti at aaron.lucchetti@wsj.com |
