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Top Financial News Thu, 27 May 1999, 5:49pm EDT
U.S. Stock Mutual Funds Attract Investors at Lowest Rate Since 1995
By Tim Quinson
U.S. Stock Funds Attract Investors at Lowest Rate Since 1995 New York,
May 27 (Bloomberg) -- U.S. investors put about $11.3 billion into stock
mutual funds in May, a 55 percent slowdown from April, and a
continuation of a trend that started last August after financial markets
tumbled, analysts said.
While most global markets have rebounded and the Dow Jones Industrial
Average hovers near a record, the amount of money that flowed into stock
funds in the first five months of this year is the lowest since 1995,
according to the Investment Company Institute, the industry's trade
group, and analysts' projections.
``The slowdown can be explained by volatile markets and the fact that
more Americans are using the Internet to buy stocks,'' said Raymond
Liberatore, an analyst at Financial Research Corp., a Boston-based firm
that tracks fund flows.
The reduction in new investments is occurring even after stock funds
took in $25.5 billion last month, the highest one-month inflow since
April 1998. About $56 billion was invested in stock funds during the
first four months of this year, down 35 percent from the same period of
1998, the ICI reported.
The decline in fund flows is affecting companies such as Capital
Group Cos., Putnam Investments and OppenheimerFunds Inc., which are
reporting lower net new investments than a year ago, Financial Research
reported.
Others are reporting higher inflows, led by Vanguard Group, the
second-biggest U.S. fund company. Vanguard is on pace to attract even
more money than the record $48.9 billion that went into the company's
stock and bond funds last year.
The Valley Forge, Pennsylvania-based company said its stock funds
attracted $3.2 billion in May, up from $2.7 billion last May. The
company's index funds, including the Vanguard Index 500, which mimics
the Standard & Poor's 500 Index, continue to attract much of the net new
investments.
Janus Capital Corp., Fidelity Investments, Alliance capital
Management LP, MFS Investment Management and Pimco Advisors Holdings LP
also are attracting higher inflows than a year ago.
Boston-based Fidelity, the biggest U.S. fund company, said
investments in its stock funds total more than $13 billion this year,
almost 30 percent ahead of last year's pace.
Internet Influence
Denver-based Janus, a unit of Kansas City Southern
Industries Inc., manages America's top-selling fund. Almost $6.8 billion
poured into the Janus Twenty Fund in the first four months of this year,
according to Financial Research. Janus shut the fund to new investors
last month.
The Internet is increasingly being used by investors as a way to buy
stocks and mutual funds, said Michael Gazala, an analyst at Forrester
Research Inc., a Cambridge, Massachusetts-based technology research
firm.
``These days, a far higher proportion of Internet trades are
stock-related,'' Gazala said. ``That will change as more mainstream
consumers start to use the Internet to invest.''
This year, an estimated $237 billion of stock investments will be
managed over the Internet, compared with $128 billion of mutual fund
investments, according to Forrester Research. By 2003, the spread will
narrow with about $1.56 trillion of stock investments managed over the
Internet and $1.2 trillion of mutual funds managed over the Internet.
Assets of the mutual fund business totaled a record $5.92 trillion at
the end of April, the ICI reported.
Investments in taxable bond funds and municipal bond funds totaled
$20.6 billion in the first four months of this year, down 21 percent
from the same period of 1998, according to the ICI.
As for money market funds, about $45.2 billion was invested in the
four-month period ended April 30, compared with $56.9 billion in same
period of 1998, the ICI reported.
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