Cash Inflows to Stock Mutual Funds Slow Slightly in November

Investors pulled back slightly on net new purchases of stock mutual funds in November compared with October, and December is expected to show about the same net cash inflow, analysts say.

But the hunger for technology stock funds was extraordinary in November, and there’s little reason to think it waned this month, given tech stocks’ continued gains.

Overall, stock funds have already attracted more net money this year than in all of 1998, virtually assuring that this will be the third-best year on record.

Stock funds took in $19.1 billion in net new cash in November, the Investment Company Institute reported Thursday. That was down from $21 billion in October, said the ICI, the industry’s chief trade group.

This month, inflows are estimated at $20.8 billion, according to fund tracker Mutual Fund Trim Tabs in Santa Rosa.

Net cash inflows measure gross purchases less redemptions and adjustments for exchanges among funds.

Even without another dollar, the January-to-November net inflow of $163.5 billion tops the full-year-1998 inflow of $157 billion, the ICI said.

But inflows are far below their peak level of $227.1 billion in 1997--in part a factor of more individual investors building their own stock portfolios rather than investing in funds.

Were it not for demand for tech-stock funds, net cash inflows might well be much lower this year.

Sector funds, dominated by tech funds, attracted more than $7 billion of the net $19.1 billion in new cash invested in November, the ICI said.

By contrast, investors were much less interested in international stock funds in November: Net inflows fell to $1.18 billion from $5.06 billion in October.

While some investors are taking on more risk by jumping into tech funds, others--or perhaps the same people, in some cases--are playing it very safe: Net inflows into money market funds totaled $53.8 billion in November, up 47% from $36.6 billion in October.

Total net new cash flows into money funds this year, through November, were $166.5 billion. That was slightly more than what stock funds took in during that period.

But money-fund inflows have declined from 1998, which saw a record net $235.3-billion increase.

The big loser among fund categories remains bond funds. As rising market interest rates continue to depress bond funds’ values, investors continue to sell out.

Taxable bond funds saw a net $1.4 billion in cash flow out in November, the ICI said. Tax-free municipal bond funds saw $3.2 billion flow out.

Through November, taxable bond funds have attracted just $12.9 billion in net new cash this year, down from $57.3 billion in the same period in 1998.

Muni bond funds now are in net redemptions for the year, to the tune of $4.9 billion. They had net cash inflows of $14 billion in the first 11 months of 1998.

Total assets of all mutual funds were $6.43 trillion at the end of November. Stock funds accounted for 57% of that sum.

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Mutual Fund Cash Inflows

Investors have already put more money into stock mutual funds this year than they did in all of 1998. But they’ve sunk even more cash into money market funds. Annual net new cash inflows, in billions:

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*Through November

Source: Investment Company Institute