Flows into mutual funds were at near-record levels in March, but analysts say the industry is not yet showing signs of fully recovering from the past two years of turbulent markets.

New York research firm Strategic Insight reported last week that equity and balanced fund flows in March resulted in the second-best month ever for mutual funds.

Investors poured a net $37 billion into the funds, including variable annuities and ETFs, the researcher said. The best month for net flows was February 2000, when investors socked more than $50 billion into funds.

In a statement, Strategic Insight attributed the gains to "rising investor and consumer confidence, poor yields for bank deposits and money market funds, seasonal investments, retirement and 529 educational savings, and on-going shifts from individual stocks into diversified mutual funds."

New York fund researcher Lipper, meanwhile, set the March flows figure at a net $29.6 billion. The firm said that, despite rising confidence among investors, investors still favor value funds, investing $13.9 billion into the vehicles last month. Investors also became less leery of international products, which posted net flows of $2.5 billion.

Growth funds only broke even by rough estimates, despite recovering equity markets, Lipper said. Money funds, which have been thriving in turbulent markets, posted outflows of $38 billion, the largest since April 2000.

Charlie Bevis, a senior editor for Boston-based Financial Research Corp., which has not yet tabulated its most recent flows figures, said much of the pop in flows is the result of seasonal issues, such as investors placing money in IRAs in anticipation of their taxes.

"A lot of these things are just natural feeders into the system," Bevis said. "I don't think anybody can say that investors have come back to where they were three or four years ago. Until we see our own numbers here, we won't know if it's a bump up or not."

Still, Bevis said the mood in the country when it comes to the economic and political environment has become slightly more optimistic recently, which could ease tension among investors and prompt them to increase their investments.

"There has been some mildly encouraging economic news," he said. "We haven't caught Bin Laden yet, but you have the usual positive news on the war front. The implication is that the economy is starting to heat up. There is certainly not as much economic bashing."

Matt McGinness, a senior analyst at the Boston research firm Cerulli Associates, said it's not surprising that investors invested $13.9 billion in value funds last month, fueling the promising numbers. However, McGinness did not expect value to maintain this momentum. Whereas value investing has proved a promising style during turbulent markets, that may not always be the case, and investors may be late to invest in the vehicles, he said.

"Investors tend to buy retrospectively," McGinness said. "People wait until well after they looked at value investing to pile back into it."

In addition, many analysts didn't put much stock in the March flow numbers because they don't believe month-to-month data can demonstrate any significant market trend. Asked why March, of all months, was such a relatively strong period for flows, McGinness chuckled, "I have no idea," he said. "I can't think of any reason why that would have happened."

And East Greenwich, R.I.-based fund consultant Geoffrey Bobroff said the gains of March amount to only a 2% increase on a base of some $6 trillion dollars in mutual fund assets across the entire industry. "That's the challenge that we wrestle with," he said. "The base is so large that the monthly [and even the] quarterly movements [make it] very hard to suggest anything specifically."

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