ALL: From Friday's NY Times: Mutual funds sitting on lots of cash, to put into stocks (like Intel). Note: What I am posting here truncates the last few paragraphs of the article, which are just a recap of recent market movements.
May 30, 1997
As Flows to Mutual Funds Increase, So Do Cash Levels
By EDWARD WYATT
NEW YORK -- Cash flows to stock and bond mutual funds have gained strength in the last two months, as investors have cheered a rebound in stock prices and a bond market rally. But fund managers have been less eager to invest the new money, instead preferring to raise the cash levels in their portfolios to the highest level in six months.
The Investment Company Institute, a mutual fund trade group, reported Thursday that $15.7 billion flowed into stock funds in April, well above the trade group's previous estimate of $13.5 billion and the March total of $10.7 billion. Bond funds, meanwhile, took in $786 million, partly reversing the previous month's net outflows of $2 billion.
Several fund companies reported Thursday that both stock and bond funds had received even greater cash flows this month. Mutual Fund Trim Tabs, a company in Santa Rosa, Calif., that tracks fund flows, estimated that stock funds had recorded their best month since January, adding more than $19 billion in new money this month, with bond funds receiving an additional $1.1 billion.
The news came as stock prices slid lower Thursday, weakened by slack demand for technology stocks and a disappointing earnings forecast by Nike Inc. The Dow Jones industrial average fell 27.05 points, to 7330.18, while the Standard & Poor's 500 index dipped 3.13 points, to 844.08. The Nasdaq composite index, which is heavy with technology stocks, dropped 7.14 points, to 1403.04.
Bond prices rose, however, and the yield on long-term Treasury bonds, which moves in the opposite direction to the price, fell to 6.97 percent from 7.02 percent.
In April, mutual fund investors continued to show enthusiasm for international and domestic stock funds. International equity funds added $5.1 billion, or one-third of the total cash flowing into the stock sector -- the highest percentage in nearly three years.
The appetite for overseas investments appears to have continued into May. At the Janus Funds in Denver, investors added $665 million to funds investing in foreign countries in the first three weeks of this month, more than in all of April. International fund flows also were strong at the Franklin/Templeton Group of funds, said Holly Gibson, a spokeswoman.
Fidelity Investments, the country's largest mutual fund company, said that net inflows to its domestic stock funds were expected to exceed $1.5 billion this month, the highest level since January.
As the rally in stock and bond prices in April and May helped fund investors to grow more bullish, mutual fund portfolio managers reacted more slowly. Two-thirds of the $15.7 billion that flowed into stock funds in April remained in cash at the end of the month. That lifted the cash portion of the average stock fund to 6.3 percent of the assets from 6 percent the previous month; it was the highest level since last October.
For the last three years, stock fund managers had generally been shrinking the store of cash in their portfolios in an effort to keep up with the soaring stock market indexes against which their performance is measured. So far in 1997, the Standard & Poor's 500 index has gained 13.9 percent before accounting for dividends. Including reinvested dividends, the index has returned 14.8 percent. |
