Despite market declines, equity funds fared reasonably well in April, garnering $11.76 billion in net inflows, according to the Investment Company Institute. Still, inflows were down 60% from March 2002, when investors poured a net $29.63 billion into stock funds, according to the ICI.
Although the S&P 500 Index dropped more than 5% and the NASDAQ was down about 11% in April, inflows into funds during the month were probably helped by the strength of the markets in March, according to Donald Cassidy, senior analyst at fund researcher Lipper of New York.
The "sharp rally in March probably made a lot of people feel better after three months or so of slightly down and sideways markets," Cassidy said.
Also, Cassidy continued, while many investors tend to buy high and sell low, 401(k) plan participants typically do not change their contribution amounts because of one weak month.
Investors have begun to shed their pessimism with regard to the equities markets, added Avi Nachmany, director of research at Strategic Insight of New York. Of the $11.76 billion in net inflows into equity funds, the vast majority, $11.08 billion, went into domestic funds, according to the ICI.
"By their actions, equity fund investors continue to display [a] great level of personal optimism that is shared among professional money managers and business executives. Our clients are telling us that they feel safe to go in the water again," Nachmany said.
Still, Cassidy predicted that May flows, although positive, will not be quite as high as those in April because of continued sluggish market performance.
Bond funds attracted $7.81 billion in net inflows in April, after inflows of $6.71 billion in March, according to the ICI. Taxable bond funds, which account for nearly 69% of the $980.4 billion in bond fund assets, gained $7.04 billion in April. Municipal bond funds had inflows of $774 million. So far this year, all bond funds have garnered more than $35 billion in net inflows, according to the ICI.
After having an outflow of more than $50 billion in March, money market funds continued to lose money in April. Nearly $20 billion flowed out of money funds last month, according to the ICI. High redemptions of money market fund shares are common in high-paying tax months, and that is one reason for the outflow, Cassidy said. But another major factor is that corporations, many of which keep their cash in money market funds, have less cash reserves as the economy rebounds, he added.
"A good amount of it is corporate activity," Cassidy said. "To the degree the economy has picked up again, inventories and receivables have picked up and those draw down cash. It sounds odd, but when the economy is down, cash builds."
American Funds of Los Angeles led all firms in terms of April inflows, with $6.01 billion, according to Financial Research Corp. of Boston. The Vanguard Group of Malvern, Pa., was second, with inflows $4.53 billion. PIMCO of Newport Beach, Calif., was third, with inflows of $2.69 billion. These three fund families firms have also experienced the largest amount of inflows so far this year, according to FRC. Vanguard is first, having gained $21.46 billion in net inflows and American Funds is second, with $18.57 billion. Year-to-date, PIMCO has attracted $10.18 billion in assets.
Janus of Denver continued to watch money exit its funds in April. The firm experienced outflows of $1.63 billion in April after losing $653 million in March, according to FRC. Through April, the firm has had outflows totaling $4.34 billion, the most of any firm. In 2001, Janus ended the year with total outflows of $4.35 billion. Janus' total assets stood at $99.52 billion at the end of April, down $43 billion from the same point in 2001.
Putnam Investments of Boston finished second behind Janus in terms of April outflows, with just over $1 billion, according to FRC. Putnam is also second in year-to-date outflows, having lost $2.84 billion through April.