May 31, 2005

Net New Cash Into Stock Funds Fell Sharply in April: ICI

Cash flow into the nation's stock funds was cut by nearly half in April compared to May, according to data released today by the Investment Company Institute (ICI). Equity portfolios took in about $8.8 billion in net new cash in April, versus inflows of $15.1 billion in March.

The ICI said that among stock funds, world equity funds posted an inflow of $6.3 billion in April, versus an inflow of $11.9 billion in March. Funds that invest primarily in the U.S. had an inflow of $2.5 billion in April, compared with an inflow of $3.3 billion in March.

Year-to-date through the end of April, stock funds have received about $56.1 billion in net new cash, far below the $107.7 billion figure recorded in the year-ago period.

Louis Harvey, president of Dalbar Inc., a Boston-based mutual fund consultant, attributes the dramatic drop in equity flows to "investors' fears of a sustained period of weakness in the U.S. stock markets, given that the gains recorded in the fourth quarter of 2004 have already been compromised." Harvey noted, however, that he thinks investors are making a mistake by not taking advantage of the market's current doldrums.

Year-to-date through the end of April, all the major equity indices were down. The Nasdaq Composite declined 11.3%, the S&P 500 dropped 3.6% and the DJIA is 4.9% in the red.

Long-term funds -- stock, bond, and hybrid funds -- collectively had a net inflow of $12.6 billion in April, compared with a net inflow of $17.8 billion in March.

Bond funds had an inflow of $1.2 billion in April, compared with an outflow of $1.3 billion in March. Taxable bond funds had an inflow of $1.8 billion in April, compared with an outflow of $976 million in March. Municipal bond funds had an outflow of $596 million in April, compared with an outflow of $310 million in March.

Money market funds had an outflow of $35.4 billion in April, compared with an outflow of $2.3 billion in March. Those offered primarily to institutions had an outflow of $25.3 billion. Those offered primarily to individuals had an outflow of $10.1 million.

Overall, the combined assets of the nation's mutual funds decreased by $126.0 billion, or 1.6%, to $7.919 trillion in April.

NET NEW CASH FLOW OF LONG-TERM FUNDS (BIL.$)

April 2005 March 2005* YTD 2005 YTD 2004*
Stock Mutual Funds 8.76 15.14 56.07 107.69
Taxable Bond Mutual Funds 1.78 -0.98 6.43 3.82
Municipal Bond Mutual Funds -0.60 -0.31 0.70 -2.86
Hybrid Mutual Funds 2.62 3.90 15.93 19.81

*Revised

Contact Bob Keane with questions or comments at: .

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