Net New Cash Into Stock Funds Eased in January: ICI

Feb. 24, 2005 -- Cash flow into stock funds slowed down somewhat in January compared to the prior month, according to data released today by the Investment Company Institute. Equity portfolios took in about $8.7 billion in net new cash in January, versus inflows of $10.2 billion in December.

The January 2005 inflow fell significantly below the $43.0 billion figure recorded in January 2004.

Louis Harvey, president of Dalbar Inc., a Boston-based mutual fund consultant, believes the large discrepancy between January 2004 and January 2005 is tied to investors chasing performance. "The spectacular stock returns in 2003 drove sales in January of 2004, as investors poured money into equities," he said. "But as performance in 2004 was rather sluggish, despite the post-election rally, investors are now showing some restraint."

The ICI said that among stock funds, world equity funds (funds that invest primarily overseas) posted an inflow of $8.1 billion in January, versus an inflow of $7.8 billion in December. Funds that invest primarily in the U.S. had an inflow of $656 million in January, compared with an inflow of $2.4 billion in December.

Long-term funds -- stock, bond, and hybrid funds -- collectively had a net inflow of $18.9 billion in January, versus a net inflow of $13.0 billion in December.

Bond funds rebounded in January, witnessed an inflow of $4.8 billion for the month, compared with an inflow of $800 million in December. Taxable bond funds had an inflow of $4.0 billion for the month, and municipal bond funds had an inflow of $870 million in January.

Harvey attributes the attraction of bond funds to investors' confidence that interest rates, although set to rise, will do so modestly, if at all. He noted that rates remain at relatively low levels.

Money market funds had an outflow of $28.3 billion in January, compared with an outflow of $8.1 billion in December. Funds offered primarily to institutions had an outflow of $34.4 billion. Funds offered primarily to individuals had an inflow of $6.1 billion.

Overall, the combined assets of the nation's mutual funds decreased by $109.4 billion, or 1.3%, to $8.0 trillion in January.

Net New Cash Flow of Long-Term Funds (Bil.$)

STOCK MUTUAL FUNDS

January 2005

December 2004*

YTD 2005

YTD 2004*

New Sales

94.88

97.05

94.88

104.60

Redemptions

-84.38

-86.41

-84.38

-69.04

Exchanges In

15.24

15.94

15.24

22.11

Exchanges Out

-17.01

-16.33

-17.01

-14.70

Net New Cash Flow

8.72

10.25

8.72

42.97

TAXABLE BOND MUTUAL FUNDS

January 2005

December 2004*

YTD 2005

YTD 2004*

New Sales

28.41

27.78

28.41

29.78

Redemptions

-24.72

-25.53

-24.72

-27.52

Exchanges In

3.72

3.52

3.72

4.80

Exchanges Out

-3.45

-4.03

-3.45

-7.10

Net New Cash Flow

3.96

1.74

3.96

-0.04

MUNICIPAL BOND MUTUAL FUNDS

January 2005

December 2004*

YTD 2005

YTD 2004*

New Sales

4.90

4.54

4.90

5.06

Redemptions

-4.13

-5.07

-4.13

-5.04

Exchanges In

0.95

0.86

0.95

1.07

Exchanges Out

-0.84

1.27

-0.84

-1.31

Net New Cash Flow

0.87

-0.94

0.87

-0.22

HYBRID MUTUAL FUNDS

January 2005

December 2004*

YTD 2005

YTD 2004*

New Sales

12.55

11.25

12.55

11.76

Redemptions

-7.53

-9.49

-7.53

-7.25

Exchanges In

1.52

1.48

1.52

2.21

Exchanges Out

-1.20

-1.29

-1.20

-1.27

Net New Cash Flow

5.35

1.95

5.35

5.45

*Revised

Contact Bob Keane with questions or comments at: bkeane@investmentadvisor.com.

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