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Thursday, June 20, 2002

May Blossoms

by: Tony Pennino

Over the course of May, there was an inflow of $15 billion into equity and balanced open-end mutual funds, at least according to Strategic Insight. A part of that total was $4.4 billion into ETFs.

Further, bond funds captured approximately $9 billion in May while money market funds captured about $2 billion.

"The stock market goes where it wants to go," Avi Nachmany, director of research at the firm, told the MutualFundWire.com. "In times of uncertainty, there is less of a turnover in assets. Investors are much less willing to experiment. That is the overall context. Mutual funds continue to attract assets despite the bad market."

"In fact, there are a reasonable number of companies that have continued to grow due to new money. 40 percent of management companies have grown reasonably well in the past eighteen months while only 10 percent have shrunk," he contended.

"People continue to remain committed to equity investing, but there have been enough mountain-to-ocean stock charts for people to get disheartened from doing it themselves. They say, 'I need someone to do it with me.' Mutual funds are the gateway for most investors, and they will benefit as people steer away from the individual stock culture," Nachmany continued.

Indeed, the researcher sees that there is a cultural shift. Investors are tending to move toward managed assets and away from the individual securities culture. Mutual funds and separate accounts as well are the beneficiaries of this move.

"There is little evidence of cannibalization of mutual funds by separate accounts. Separate account platforms tend to benefit from people moving out of common stocks. In fact, the data shows that mutual fund companies that launch a separate account product tend to see improved business on their mutual fund side," he said.

"I know that the market is extremely volatile right now, but if I were a mutual fund manager, I think I would find enough to be optimistic on a long-term basis," the executive concluded.

Strategic Insight also reported that with May figures calculated in, equity/balanced fund inflows for the first five months of 2002 passed the $100 million mark. Bond funds reached about $50 billion for the same period. 

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