Equity mutual fund inflows hit their highest level in a year as investors cheered a swift military campaign in Iraq and a broad-based rally in stocks.
Investors added an estimated $14 billion to equity funds in April, according to fund tracking firm Lipper. That represents the largest monthly inflow since the nearly $15 billion inflow in April 2002. As a result of the latest influx of cash, equity fund flows for 2003 have crossed into positive territory.
"There was a relief rally in stocks which extended to seven weeks by the end of April and fund investors took some courage from that," said Don Cassidy, senior research analyst at Lipper. "We will see how much sticking power these inflows have when the rally eventually cools and we have a sideways or down month in prices," he added.
The good fortune was spread across the entire cluster of equity funds, although it was more of a result of declining redemptions than frenzied buying, Lipper said U.S. diversified equity funds ranked first in net inflows totaling $6.8 billion, reversing a slight outflow in March. Large-cap funds, in particular, added $500 million, marking their first in gain since March 2002 and only the third time in 27 months the group has recorded an inflow.
Mixed equity funds remained an attractive choice among investors, tacking on $4.2 billion, up from $2.3 billion in March. Within that group, income funds led the pack, taking in $2 billion, or 3% of prior month total assets. World equity funds took third place, amassing roughly $1.9 billion on the strength of international fund performance. International funds benefited from the lingering concerns over the weak U.S. dollar.
As for fixed-income, bond funds took in $9 billion in April, down from the $11 billion they recorded the previous month. Money market funds weathered $55 billion in outflows, equaling its year-ago mark, due to the fact that April is a significant tax-paying month.