Fund Inflows Fell23 Percent in July
September 11, 2000
Although net sales of long-term funds declined substantially in July, fund analysts downplayed the decline and said the fund industry would quickly rebound.
July net sales of long-term equity and fixed-income funds were down 23.5 percent to $15.6 billion, from $20.4 billion in June, according to the ICI.
Net inflows into equity mutual funds in July fell 20 percent to $17.6 billion, down from $22.1 billion in June, the ICI said.
By comparison, long-term fund net sales rose 31 percent in June after a 50 percent drop in May, according to the ICI.
July sales figures from Financial Research Corp. of Boston indicated a sharper decline of 29 percent in net sales for long-term mutual funds. July long-term fund sales of $7.8 billion were significantly lower than June net sales of $12.9 billion, according to FRC. The totals are different than those of the ICI because ICI's numbers include flows into variable annuity sub-accounts, according to FRC.
July sales appeared particularly weak because June sales spiked 173 percent over May net sales of $5.1 billion, FRC said. Sales of long-term equity funds were slow in May because of market volatility in March and April, FRC said. June sales "spiked upward after May's tech market revolt settled down," FRC said.
One notable development in July was the sizeable net inflow into municipal bond funds, said Bruce Brewington, an analyst with Putnam Lovell Securities of San Francisco. There were net inflows of $850 million for the month, according to the ICI. Investors gravitated to these conservative investments because of volatility in the market, Brewington said. July was the first month this year that municipals bonds have experienced a net inflow, he said.
Burton Greenwald, president of Greenwald Associates of Philadelphia, said the July decline in net inflows was merely seasonal. It was also not surprising, given strong sales in the earlier months, Greenwald said.
"There has been so much ebullience in the market for so long that any time you have a slight pause in the equity markets, it gets reflected pretty rapidly in fund sales and soon bounces back," Greenwald said.
"We were faced with somewhat of a reaction to the market," said Geoffrey Bobroff, president of Bobroff Consulting of East Greenwich, R.I. "It doesn't surprise me that sales would have dried up by 23 percent. It's not a top-line concern."
The fund industry should not expect strong sales in July or August, in any case, as investors' attentions and wallets are focused on vacations during this time, Greenwald and Bobroff said.
"The real payoff is going to come in the first quarter of next year, when people are brandishing bonuses," Greenwald said.
A more significant figure than month-to-month sales is year-to-date sales, Greenwald said. Year-to-to-date through the end of July, net long-term fund sales were up 38 percent to $166.6 billion, up from $120.8 billion in the same period last year, according to the ICI.
Lipper of Summit, N.J. released its own net sales figures for July. Unlike the ICI and FRC, Lipper combines data for all types of mutual funds, including money-market funds. Unlike the ICI and FRC, Lipper figures indicated July had been a good month for mutual funds.
After suffering $4 billion of net withdrawals in June, mutual funds staged an impressive comeback with $38 billion in net inflows in July, Lipper said. Quarterly retirement-plan contributions may have helped inflows in July, as well as strong inflows into fixed-income and money-market funds in reaction to volatility in the markets, Lipper said.
Lipper initially said that mutual funds suffered $22 billion in net outflows in June, but has since readjusted its figures to be closer to ICI's, said Donald Cassidy, a senior research analyst with Lipper.