Investors are returning to equity-based mutual funds following their September flight to safety, executives for industry groups and insurer-sponsored funds say. Spurring the return is a belief that the economy will soon start to recover.
Although executives in the industry agree the disastrous events of Sept. 11 spurred investors to jump into safe investments such as money funds, they also note there was already an obvious trend in that direction.
“Investors behaved in a manner consistent with past bear markets, slowing down new purchases of fund shares,” observes Chris Wloszczyna, a spokesperson for the Investment Company Institute in Washington.
ICI data shows there was a net outflow of $29.3 billion from stock mutual funds in September as investors ran for cover in the direction of the money market and bonds. There was also a modest outflow from hybrid funds.
“The amount of money coming in has been declining since the first quarter of 2000,” notes Wloszczyna. “Money coming out of the [stock] funds has also declined, but not as quickly. This is typical of what weve seen back to end of World War II, whenever the stock market declines.”
When the financial markets reopened about a week after Sept. 11, anecdotal evidence suggests there was a spike in consumer redemptions. But this was not unusual, Wloszczyna says.
“There may have been pent-up demand from people who hadnt had access to their money,” he adds.
Like ICI, Standard & Poor’s also found that for the first time in several months, fund companies in October reported new cash coming back into stock funds.
Spokespersons for insurance companies that sponsor mutual funds said their funds largely fared no better or worse than the industry as a whole.
Anticipating adverse investor reaction to the terrorist attacks, many companies increased staffing levels of call centers and placed reassuring messages on their Web sites for both consumers and financial professionals.
“Sept. 11 was more of a blip,” says Mike Beer, vice president of mutual funds for the Principal Financial Group, Des Moines, Iowa. “There was a 24% decrease in sales in September, but October rebounded to more normal levels. November looks like it will be the second highest sales month for the year for us [after April]. So weve seen a rapid recovery from Sept. 11. I think that’s true for most in the investment industry.”
Scott Curtis, senior vice president for the independent broker/dealer division of GE Financial Assurance, Richmond, Va., concurs.
“Since the end of September through today, weve seen a pickup in interest in GE stock funds that are more value-oriented than growth-oriented,” Curtis observes. “Thats what people are looking for now, not the go-go style of 97 and 98. Given whats been going on all year, people have focused more on consistent performers rather than home-run hitters.”