Investing November 17, 2004

Equity Funds Spring Ahead in October

November 17, 2004 (PLANSPONSOR.com) - Mutual fund investors showed a bit more confidence in the equity markets during October as net flows into stock funds over the month totaled $15.3 billion, a $5 billion hike from the previous month, according to a Lipper FundFlows Insight Report.
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Meanwhile, mixed-equity funds were about the same in October, showing a $3.7 billion in flow while bond flows edged up slightly from  September to $2.1 billion, according to the Lipper report.

A Lipper analyst said the numbers were encouraging, but cautioned about jumping the gun to conclusions. “One month does not a trend make, and this trend as of October month-end is not even a month old, but to us and other analysts, some of the signs appear to be in place that could lift various markets, sectors, stocks, and funds through their year-long 2004 consolidation,” wrote analyst Andrew Clark.

Money Trail

Money market funds had outflows of $17.8 billion in October, down sharply from $30.3 billion in September (attributed in part to quarterly tax payments) – but only the third time since 1984 that money market funds have experienced an outflow in October.

According to the Lipper data, US and International/Global Large-Cap funds gave back $3.7 billion, while Multi-Cap offerings sprang ahead $12.4 billion. “To us, ” commented Clark, “this 10-month long flow focus on multi-caps signals a hesitancy by fund investors to commit to a particular capitalization and its attendant risks.” Meanwhile, Mid-Cap and Small-Cap funds also showed a $6.3 billion October gain.

Looking at fund styles, Core funds showed the strongest performance in Multi-Cap and Mid-Cap/Small-Cap with inflows of $5.9 billion and $5.7 billion respectively. Other than that, in both Multi-Cap and Mid-Cap/Small-Cap, value funds bested growth offerings.

The Lipper data indicated that REITs and natural resources funds lead the sectors performance with combined inflows of $2.9 billion. Health and Biotech sector offerings suffered a $1.1 billion outflow.

In the fixed-income arena, the Lipper data showed that Long funds with a $500 million oufllow, short – bond funds with a $100 million loss and intermediate funds even during October. Of the bond types, corporate bond funds showed a $2.6 billion advance.

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