The move out of equity funds by investors has not only increased, it has become a longer-term trip. Early estimates of September outflows from stock funds indicate that investors took out a record $43.9 billion from U.S. stock funds, according to The outflows alone are problematic, but what might constitute an even larger problem for predominantly equity fund firms actually began in August, namely the direction of those outflows. In August, investors continued to turn not only to fixed-income funds, but to longer-term bond funds, according to Lipper. Long-term bond funds had inflows of $15.4 billion in that month. Those funds experienced outflows in every month last year and while they have had consistent inflows this year, average net sales have been $5.5 billion per month, according to Lipper.

Stock funds experienced net outflows in June, July and August and that, due at least in part to the recent tragedies, has been exacerbated in September. The overall market downturn began about 18 months ago, and investment managers and shareholders alike have waited for and speculated on when the market would turn around. The movement into long-term bond funds suggests that investors no longer think that a return might be approaching soon, according to Donald Cassidy, a senior analyst at Lipper. And that was before the attacks of Sept. 11.

"I think the one new thing that is very interesting and notable is the way money started flowing into longer-term bond funds," said Cassidy. "The months before August, they had gone into money-market funds and shorter-term bond funds, but buying a long-term fund is more of a commitment. That shows the depth of people's discomfort."

One of the reasons investors may be turning to long-term bond funds is that they have no real expectation for inflation, the enemy of bonds, nor a market turnaround anytime soon, according to Alan Papier, a mutual fund analyst with Morningstar.

"People were definitely getting concerned about economic weakness before the attacks, but specifically the movement into long-term bond funds suggests that people are simply worried about the state of the economy for the longer term," said Papier

That trend is likely to have continued, perhaps at an even greater pace, in September, according to Cassidy. That does not bode well for traditional stock-based fund firms in the long term, a group which has already suffered a fairly miserable short term.

Janus, one of the most equity-oriented firms, experienced outflows of $1.6 billion in August, bringing its total outflows for the year to $7.5 billion, according to Financial Research Corporation. Last year, Janus had already drawn in over $39 billion by the end of August. Other equity fund giants, such as Putnam Investments and AIM Management Group, lost $1.02 billion and $543 million in August, respectively. At this time last year, Putnam had garnered over $15 billion in net inflows and AIM had over $10 billion.

Conversely, the more conservative fund firms had a huge August. The Vanguard Group led all firms with inflows of $4.2 billion and has captured $25.7 billion so far this year, compared to $10.8 billion at the same time last year, and more than $10 billion more than second-place American Funds has captured. Fixed-income specialist PIMCO Funds has benefited immensely from the movement into that category. The firm's funds saw inflows of $1.7 billion in August and have received $9.7 billion year-to-date, nearly 13% of the firm's total assets, which stand at $75.4 billion, according to FRC. For comparison, Vanguard's inflow of over $25 billion this year accounts for 5.3% of its total assets.

For the flows of individual products in August, PIMCO's Total Return fund, an intermediate-term bond fund was first in net flows with $810 billion, according to FRC. Vanguard's Total Bond Index fund, also an intermediate bond fund, was next with inflows of $763 billion.

"Right now, investors want to see something tangible," said Cassidy. If that was true in August, it was even more so in September, he added. "They're looking for something that looks safer and shows them some current return even if it's not tax efficient. Maybe they're doing it all in their 401(k)s or their IRAs, but they're doing it."

Unsurprisingly, value offerings continued to do well in terms of flows in August. Small-, mid-, and large-cap value funds netted a combined $6.9 billion in August, according to FRC. That brings year-to-date inflows for value products to $51 billion, compared to outflows of $756 million at the same time last year.

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