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Fund Investors Call and Click, But Don't Redeem


The fund industry held its collective breath and prepared for the worst last Monday as markets reopened, but preliminary indications show that the levels of investor panic some firms may have feared did not materialize. Fund investors may have called fund companies or visited Web sites, but it does not appear they pulled significant amounts of money out of their funds.

Preliminary data offered by TrimTabs.com, a Santa Rosa, Calif.-based research firm that tracks daily fund flows, estimates last Monday's flows at an estimated negative $1.8 billion, which is much less than expected, said Charles Biderman, president of TrimTabs. Biderman guessed outflows would have been closer to $3 to $4 billion on Monday. Still, Biderman hedged TrimTabs preliminary estimates. "We're suspicious of some of the data, so outflows might be higher," he said. The problem, he said, is that reporting may have been slightly inaccurate because of the lengthy market closure, he said.

Transaction, Call Activity Not Surprising

At San Antonio-based USAA Investment Management, phone volume was up as were transaction levels, said Tom Honeycutt, a company spokesman. Sellers outnumbered buyers at the firm two-to-one, but the asset levels of those trades cancelled out each other, with buyers investing more assets than the sellers dumped, he said. "I think people stuck with us."

A lot of the movement occurred within USAA's family of products. Some investors shifted their assets to more conservative investments, he said.

In anticipation of last Monday, USAA began preparing its phone representatives the week of the attack when the markets were closed and call volume was down.

While specific data measuring the amount of traffic on USAA's Web site was not available, the site handled a significant increase in traffic the week of the tragedy as well as last Monday. Approximately 70% of the firm's business is conducted online so the firm prepared for Monday's increased traffic by increasing its server capacity, Honeycutt said.

Patriotic Fervor Benefits USAA

Interestingly, USAA may have benefited from the patriotic fervor that has swept the country since the terrorist attacks. The firm, which markets to members of the military and their families, received calls from investors Monday showing their patriotism and resolve for the country by investing, Honeycutt said. "That message resonates deeply with them," he said.

Transactions Up, On the Positive Side

Transactions for AIM Management of Houston was slightly higher last Monday, but there were more purchases than redemptions, said Ivy McLemore, a company spokesman. "What we've seen is slightly higher transactions than normal," he said. Some of that movement was investors moving into more conservative investments and even some investors who saw an opportunity to buy on Monday, he said. But buying outweighed selling on Monday, two to one.

Call volume to the firm was about 20% higher than normal volume for a typical Monday at this time of year. AIM also experienced a spike in Web traffic. The amount of volume the site handles was up 50% from normal, McLemore said. "In situations like this investment decisions can be based on emotions, not logic," he said. "I can say that for the most part, investors acted in a very rational manner."

Marketing Message Keeps Call Volumes Down

All was quiet at Chicago-based Ariel Capital Management last Monday as well, said Merrilyn Kosier, director of marketing for the firm. "Our mantra is, slow and steady wins the race' and we're not doing anything differently this week versus last and it seems to us that, so far, it's been business as usual," she said.

The firm experienced no increase in Web site traffic or phone volumes, she said. Kosier credits the lack of activity to the firm's mantra, which is also its marketing slogan. "I do believe the philosophy made a difference with shareholders," she said.

But that is not to say that Ariel did not prepare for Monday. The firm issued scripts to its telephone reps of possible questions shareholders might have concerning the disaster It was also prepared to patch calls through to regular representatives if the amount of traffic called for it. But while that was not necessary "there's no down side to planning," she said.

Perhaps one of the most heartening indications that investors are remained level-headed, came last Tuesday afternoon in a statement issued by Fred Alger Management. The firms customers held shares despite the fact that markets plummeted and the firm's president and 38 staff members are missing following the attack (See MFMN, 9/18/01). The company reported "virtually no redemption of assets by investors as of market close," according to a statement from Fred Alger, now president of the asset management company.