Retirement Holdings Lend Stability in 2002

Retirement investments lent stability to the trends, with over 60% of equity fund assets kept within tax-deferred retirement accounts, according to the report.  Additionally, about 90% of the roughly $500 billion garnered by equity/balanced funds over the past four years can be attributable to tax-deferred retirement accounts.

“Middle” Market

According to the survey, middle-income Americans maintained their focus on equity mutual funds for retirement accounts and for strategic asset allocation for their investments intended to be maintained over the long-term.   During 2002, equity funds’ share of gross sales was about 70% of the industry’s total, with bond funds accounting for a rising, but still just 30% share of long-term mutual fund sales.

Despite major equity declines in 2002, Strategic Insight said shareholders have not modified their retention patterns.   On average, monthly redemption rates rose only 0.2% last year to a monthly average of 1.9% of assets.   These minor increases translate to only $2 out of $1000 invested redeeming each month more frequently in 2002 than the prior year.  

Equity and balanced funds still managed to attract positive cash inflows for all of 2002.   Theses include:

• Open-end funds (excluding ETFs): estimated cash inflows at $17 billion
• Closed-end funds: cash inflows of $6 billion
• ETFs registered as mutual funds: cash inflows $16 billion
• Funds underlying variable insurance products: cash outflows estimated at $24 billion.

At year-end 2002, total mutual fund industry assets tracked by Strategic Insight, made up of open and closed-end funds, reached $6.7 trillion, the company said in an announcement. This came despite a strong lingering down market in which the bears have long been in control.