Stock Funds Show Mild Outflow in January; Bonds St

Feb. 27, 2003 — Stock funds continued to lose cash as the new year began, but in less dramatic fashion outflows of about $466 million in January, versus outflows of $8.3 billion in December, according to data released today by the Investment Company Institute.

Bond funds continued to attract investor interest with inflows of $12.7 billion in January, compared to inflows of $7.3 billion in December.

Money-market funds had an outflow of $1.5 billion in January, compared to outflows of $38.8 billion in December, ICI said. Funds offered primarily to institutions had an outflow of $5.4 billion in January, while funds offered primarily to individuals had an inflow of $3.9 billion for the month.

“I think virtually all aggressive investing will be on the back-burner until this crisis between the U.S. and Iraq is resolved one way or another,” said Louis Harvey, president of Dalbar Inc., a Boston-based mutual fund consultant. He added: “If the war is definitively averted, I suspect people with start investing again; however, if we do indeed go to a war, people will also invest because this will bring closure to the clouds of uncertainty we are currently under.”

Harvey believes that “the biggest danger right now, as far as the markets are concerned, is that nothing happens and this stalemate continues.” He added that he thinks a war with Iraq will likely enrich defense stocks, as well as international equities.

Overall, the combined assets of the nation’s mutual funds decreased by $57.8 billion, or 0.9%, to $6.33 trillion in January.

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

STOCK MUTUAL FUNDSAmounts in Billion $January 03December 02*Year-to-Date 03Year-to-Date 02*

New Sales72.0261.6172.0291.42

Redemptions-68.40-66.19-68.40-75.21

Net Exchanges-4.09-3.73-4.093.16

Net New Cash Flow-0.47-8.30-0.4719.37

TAXABLE BOND MUTUAL FUNDS

January 2003December 2002*Year-to-Date 2003Year-to-Date 2002*

New Sales33.3327.4133.3325.90

Redemptions-22.29-21.59-22.29-17.25