Thursday October 18, 2:11 pm Eastern Time
Investors Pull $32 Billion From Funds
By Cal Mankowski
NEW YORK (Reuters) - Investors pulled a record $32 billion out of stock mutual funds in September as the attacks on New York and the Washington area triggered a steep decline in stock prices, fund tracking company Lipper Inc. said on Thursday.
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September's estimated net outflow topped the previous record of $20.6 billion reported for March of this year by the Investment Company Institute (ICI), the industry trade group. ICI figures for September are expected in a few weeks.
October could see a modest inflow of $700 million, based on activity through Oct. 16, according to estimates by TrimTabs.com, a Santa Rosa, California-based fund tracker.
``We do see investors returning to stock funds this month,'' said a spokesman for Valley Forge, Pennsylvania-based Vanguard Group, the second-largest U.S. fund company. Figures for the month were not available.
In September, Vanguard saw about $1.3 billion leave its stock funds, representing less than 0.5 percent of assets. Vanguard took in a net $1.7 billion in its bond funds last month and the net inflow to its money market funds was about $1.8 billion.
According to Lipper, bond funds overall and money market funds had inflows in September.
``It was a textbook case of investors fleeing emotional discomfort which -- barring unpredictable events -- is usually
a marker for major market bottoms,'' said Lipper analyst Don Cassidy. ``Unfortunately, when people seek emotional comfort on Wall Street -- buying late or selling late in major trend moves -- they usually reap financial discomfort.''
September marked the third consecutive month that stock funds have been hit by net withdrawals. Even before the attacks, September was heading for a negative month, Lipper noted.
Outflows earlier in the year, in February and March, have resulted in five months of withdrawals this year.
Not since the late 1980s has there been a year with more than two months of net withdrawals from stock funds. The 1990s produced a long string of positive flows on a monthly basis.
Although the September outflows represent a record in dollar terms, they amount to about 0.9 percent of stock fund assets, which stood at $3.39 trillion at the end of August. After the October 1987 market crash, stock funds suffered outflows closer to 5 percent.
With cash levels at stock funds recently a little over 5 percent, the fund managers have enough of a cushion so that they do not have to sell stocks to meet redemptions, Lipper noted.
All of the major stock market indexes fell last month. The Dow Jones industrial average (.DJI) posted a decline of 11.1 percent.
Value stock funds recorded smaller outflows than growth funds, reflecting stronger relative performance of the category which invests in stocks considered to be bargains, Lipper said. Value funds saw outflows of $2.1 billion, while those investing in stocks of fast-growing companies had outflows of $12.8 billion.
U.S. diversified stock funds as a whole saw outflows of $21.5 billion. The only category of diversified funds with an inflow was mid-cap value, which took in a net $1.5 billion.
Funds investing globally had outflows of $2.8 billion.
Money market funds, which normally have small net September outflows due to seasonal tax payments, received a huge net inflow of $57.6 billion, Lipper said.
Bond funds, which have been getting positive flows during 2001, continued to show a net inflow overall but the total was smaller than in August.
Bond fund investors shifted from longer-maturity funds into short/intermediate funds and to the money funds. Long-term bond funds had an outflow of $2.1 billion while short and intermediate bond funds had an inflow of $9.4 billion.
TrimTabs.com research director Carl Wittnebert said stock funds tracked by the company posted a 5 percent increase in net asset values in early October. He said in the past this would have triggered much higher inflows than the $700 million that is now anticipated for the month. He said a change in investor psychology may be at work. |
