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Defined Contributions Maintain Funds' Momentum: St

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Oct. 18, 2002 — Despite a dismal year, open-end mutual funds* witnessed an estimated $47 billion in net new flows from defined contribution plans during 2001, accounting for one-third or more of cumulative flows of the fund industry last year, according to fund tracker Strategic Insight.

Among the leading fund complexes, Fidelity had an estimated $16 billion in defined contribution net flows into its funds last years, followed by American Funds with $8.5 billion, Vanguard with $7 billion, and PIMCO with $4 billion.

Strategic Insight estimated that possibly $80 billion, equal to more than 100% of all equity fund cash inflows last year, was accounted for by defined contribution plans, new contributory IRAs, rollover IRAs, variable annuities, and other qualified net buying of equity funds during 2001.

Value funds, which saw net redemptions in 2000 overall in defined contribution plans, had a strong reversal, garnering an estimated $10 billion in net flows into defined contribution plans in 2001, a pattern persisting in 2002. Growth funds, too, continued to attract positive defined contribution inflows in 2001, despite dramatic losses since early 2000, according to the findings.

Defined contribution new flows into bond funds underwent a dramatic improvement in 2001, totaling $11 billion, with short/intermediate duration and high-quality bond funds accounting for much of the flows, Strategic Insight said.

*Excluding flows of institutional money-market funds.