Institutions Join Record Equity Fund Exodus

October 19, 2001 ( - Investors pulled a record $32 billion from stock mutual funds in September, according to preliminary data from fund tracker Lipper. More than $6 billion of that outflow was from institutional investors, according to the report.

If those estimates hold up, it would be well more than the previous record of $20.6 billion reported for March of this year by the Investment Company Institute (ICI) (see Investors Flee US Equity Funds in March ). A processing error at Lipper resulted in a $9 billion error in the preliminary calculations in February (see Lipper Miscalculates February Outflows ).

Still, to put that record in context, the September outflows are less than 1% of total stock fund assets, which stood at $3.38 trillion at the end of August (see Stock Funds Slide, Bonds Buoyed in August ). After the October 1987 crash – 14 years ago today- stock funds suffered outflows of nearly 5%.

“Out” Flows

It was the third month in a row that stock funds have been hit by net withdrawals, and the fifth month so far this year. You’d have to look back to the late 1980s to find a year with more than two months of net withdrawals from equity funds.

Overall, value stock funds experienced smaller outflows than growth funds, $2.1 billion versus $12.8 billion, according to Lipper. US diversified stock funds saw outflows of $21.5 billion, with mid-cap values the only category to enjoy a net inflow, $1.5 billion. Sector funds saw $3.2 billion slip from their fingers, while international funds saw outflows of $2.8 billion.

Money market funds were the big winner, drawing a massive $57.6 billion net inflow. In fact, a short-term focus appeared to be the order of the day, as bond fund investors moved from long-term bond funds ($2.1 billion net outflow), while short- and intermediate-term funds drew a net $9.4 billion, according to the report.

Family Matters

According to Reuters, Vanguard saw about $1.3 billion leave its stock funds, less than 0.5% of its assets. A net $1.7 billion moved into its bond funds last month, while a net $1.8 billion flowed to money market funds at the fund giant.

Roughly $5.7 billion pulled out of Fidelity’s stock funds during September, about 1% of assets, according to Reuters. Bond funds and money market funds were net gainers, with inflows of $1.1 billion and $8.5 billion, respectively.