WHERE THE MONEY IS GOING
Lipper Senior Research Analyst Don Cassidy on KTLK AM-760; Thursday, August 23
Q. So you folks at Lipper have toted up the numbers on where investorswere putting their money in July, Don?A. Right, and the short answer is they seemed to be keeping it in theirchecking accounts.
Q. Oh? A bad month for funds?
A. Well, stocks have been drifting lower since about early/mid May, andpeople seem not to be very confident about the future, until they see signsthe economy is turning up...
Q. So they are reflecting that in what they do in mutual funds, I assume.
A. Of course. Pretty much as usual, the flow of money seems to follow orcoincide with the hot and cold areas of the markets.
Q. OK, so what happened in July, then?
A. Well, BOND funds got about $7 billion of new money, which was theirbest in a long while. And MONEY MARKET funds took in a net of about $8billion, which is below-par for them on average. But the biggest news wasthe smallest number: EQUITY funds had about $1.5 billion of net OUTFLOW.
Q. OUTFLOW? Wow. That's pretty unusual, isn't it?
A. Yes. The last month we saw a net outflow was March, when the marketmade its dramatic little bottom. And we had a small outflow in February.There was one time back in August 1998 (during the Russia/Asia creditcrisis), and then you need to go back to 1990 to find another "outflow"month in equity funds.
Q. Isn't this July info just part of a fairly soft trend all this year?
A. Right. So far in 2001 (7 months), investors have put in a net of about$58 billion into stock funds; last year at this time it was over $155billion.
Q. So are they sticking the money into BOND and MONEY funds instead?
A. Only to a very small extent. I think most people are so heavilyeducated, or in the habit, to just buy stock funds, that not many go forbond funds. And the money market fund numbers are not showing any unusualbuild-up, so we think people are just not buying. Maybe they are payingdown credit card debt. And of course all those folks who have been laidoff are no longer contributing to their 401(k)s right now...
We've looked at the overall patterns for the past few years: combining ALLkinds of funds, here are the net inflows:
Estimated Net Flows ($ Billions):
1998: $40 - per month on average
1999: $30
2000: $32 - helped by technology bubble early
2001: $20
July: $13.8
Q. Well, OK, you know the next question: how did our local Denver fundcompanies do?
A. Four had inflows and 4 had outflows, but as usual Janus dominated thebottom line:
Estimated Net Flows:
Berger: +$50 million
ICON: +$30 m
Aristata: +$1 m
Invt Rsch: +$1 m ("Amer Growth" funds)
Westcore/DIA: -$10 m
Dreyfus/Founders: -$50 m
Invesco: -$100 m
Janus: -$1.2 BILLION
Colorado Total: -1.35 Billion
Q. Invesco has done pretty well most of this year, but this month anoutflow?
A. True. They have a lot of SECTOR funds (which had outflows nationally)and they have some INTERNATIONAL funds, which had big outflows nationally.These aggressive choices were out of favor.And of course Janus is just suffering from big-cap and technology blues.Science & Technology funds had an $800 million outflow nationally.
Q. What do you make of it all?
A. People were buying conservative stuff: balanced funds, bond funds, munifunds, small-cap value, mid-cap value .... and selling what has beenhurting them. It looks as though, once the market turns back up, it willbe yet another case of buy HIGH and sell LOW. People are always movingtowards comfort, which is bad financially in the long run.
