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November 10, 2008 at 07:00 PM
Despite October redemption activity being high in the first two weeks of the month, stock fund redemptions for the past few weeks have been “modest and reassuring,” while 401(k) investors’ transfers from equity funds to safer alternatives, “while rising periodically, remained minimal in the past two weeks following the early October spike,” according to recent research from Strategic Insight, a business intelligence provider to the mutual fund industry.
Says Strategic Insight: “Although October redemption activity was elevated, high-volume defensive switches were concentrated in just a few days of extreme stock market anxiety, mostly during the second week of the month. And even during such high-volatility days, stock fund redemptions reached just 0.3% of stock fund assets: this means that $997 out of every $1,000 stayed put.”
This is not surprising, Strategic Insight says, because its research, supported by findings from the Investment Company Institute, “consistently shows that during the past 30 years, spikes in fund redemption activity tend to be short-lived and non-recurring. For all of October, stock fund net redemptions are estimated at roughly 1.5% of equity fund assets in aggregate — not surprisingly, at the high end of historical experiences,” according to preliminary estimates by Strategic Insight.
