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February 28, 2005 at 07:00 PM
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.
