Magazine article American Banker

Equity Funds Grew Briskly in Aug., Trade Group Says

Magazine article American Banker

Equity Funds Grew Briskly in Aug., Trade Group Says

Article excerpt

Equity funds grew at a brisk pace in August, buoyed by investors' confidence in both the domestic and global economy, according to statistics released last week by the Investment Company Institute.

Investors accelerated their already robust purchases of domestic and global equity funds as they withdrew money from bond funds of all types, the Washington research group said.

Stock mutual funds saw $23.4 billion of new money arrive, a jump from the $17.3 billion influx in July, the institute said. Inflows were strong both in aggressive growth funds, which saw $8.22 billion of new money, up from $6.67 billion in July, and in more moderate growth funds, which gained $11.43 billion, up from $10.37 billion.

Corporate and Treasury fixed-income funds continued to see outflows, though the net asset value of many of these funds grew. Despite the positive performance, investors withdrew $1.3 billion in August.

Municipal bond funds also turned downward. Investors removed $654 million in August, a reversal from the July inflows totaling $881 million.

Hybrid stock and bond funds fared no better. Between redemptions and exchanges, these funds saw $1.3 billion of outflows, the institute said.

Investors' aversion to bond funds is surprising, considering that some bonds are outperforming the broader equity market this year, said Phil Foreman, portfolio manager at the Evergreen Funds family of First Union Corp. in Charlotte, N.C.

Many bank brokers who have noticed bonds' good performance this year are avoiding bond funds and simply selling the bonds themselves, said Mark Beeson, head of funds at Bank One Investments in Columbus, Ohio.

Watching investors leave funds that have well-performing underlying assets is distressing to fund managers, Mr. Beeson said, because it raises questions about how well fund shareholders are being served. …

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