September was the worst month on record for equity funds in terms of net outflows with $29.5 billion in outflows, but there is some good news for equity funds: Money market funds experienced net inflows of $53.2 billion, the most since February, according to the Investment Company Institute.

"September is normally an outflow month for money market funds because of estimated tax payments being due," said Don Cassidy, senior analyst at Lipper. "So the large inflow there seems to be pretty clearly a result of equity-fund flight."

So what do money market fund flows have to do with equity funds? The notion that much of the money pulled out of equity funds was put into money market funds is good news for equities because it suggests that the outflows are temporary, Cassidy said.

"Typically, investors putting money into money market funds are looking to go back into equities when the markets turn around," said Jim Lowell, mutual funds analyst and editor of Fidelity Investor. "So if the market does come back, there is a tremendous amount of cash sitting on the sidelines waiting to flow into equity funds."

The trend began in August when equity funds experienced net outflows of $4.8 billion while money market funds took in $26.5 billion, according to the ICI. In fact, the movement from equity funds to money market funds appears to have taken place throughout the year. Year-to-date flows into money market funds have surpassed $224 billion, and are about 73.5% percent of total fund flows, according to Lipper. Compare that to 41.8% in 2000 and 53.6% in 1999.

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