LIPPER SENIOR RESEARCH ANALYST DON CASSIDY ON KTLK AM-760
Thursday, Sept. 27
Q. Well, Don, usually about this time each month we talk about whereinvestors are putting their mutual fund money.A. Right. And for August, the latest full-month data available, we sawcontinued caution in their actions.
Q. So are you saying money was being pulled out?
A. Right, from equity funds anyway. We saw about $8 billion come out ofequity funds, and about $15 billion went INTO bond funds, and about $24billion went into Money Market funds in August.
Q. Wow. That $8 billion number seems fairly large by historical standards,right??
A. Yes, in dollars it is the second biggest outflow this year (March wasabout $20 billion) and the third largest ever (October 1987 was about $10billion). But in proportion to overall assets in stock funds, it's onlyabout a quarter of one percent.
Q. So does that mean that fund redemptions really have not been a bigfactor in pushing the stock market down?
A. We think that's true. The average stock mutual fund was carryingalmost 6% in cash in July & August, so net redemptions of far less than 1%really should not have put on pressure to liquidate portfolio holdings.Now, of course, there certainly were a few individual funds that had lowcash AND were hit with heavier redemptions, but on the whole we would say,no..... Longer term, of course, if funds are not getting net new money thatis not helping the level of the stock market as it was in 1998-99.
Q. You mentioned that bond funds got $15 billion in net new money inAugust...
A. Right, and this time we saw several billion go into long-term bondfunds, whereas before nearly all was going to short/intermediate-term bondfunds. Incredible as it sounds, for the 8 months through August we havenow seen more net new money go into BOND funds than into stock funds --first time since 1991.
Q. How about the LOCAL fund companies here in Colorado, Don?
A. Well, on an overall basis the numbers were not too bad. Net, about$110 million flowed IN, comparing favorably with the $1.4 billion thatflowed OUT in July.
Q. But were the local houses seeing the same overall national breakdown,with equity funds negative and so forth?
A. You hit it right on the button. Our data for the Colorado fundmanagers show:
Estimated Net Flows ($Billions)
- Equity Funds $ -2.2
- Money Market Funds +2.1
- Long-term Bond Funds +0.2
Q. So locally we really did not get as much bond money coming in, relativeto stock fund outflows....
A. That's true, but of course our local managers are mainly thought of asEQUITY-oriented. We don't have any Nuveens or Franklins or PIMCOs here todraw in a lot of bond fund money.
Q. So, then, how did the various different advisors do?
A. A bit of a switch from recent trends, with Janus actually doing best,BUT it was all in their Money Market funds...
Estimated Net Flows ($Millions)
- Janus: +460 (but -1.75 Billion in equity funds)
- Berger: +80
- ICON: +60 (this was about a 9% gain on their asset base)
- Aristata : +1
- Invt Research: flat
- Marsico: -50
- Dreyfus/Fdrs: -50
- Invesco: -100
Q. Invesco had been doing quite well on flows earlier in the year, butNOW...?
A. Well, they have a lot of aggressive-style funds such as world regionand single-sector, and people were shying away from aggressive decisions inAugust, looking for safer feeling ideas...
Estimated Net Flows ($Millions)
- Invesco European -50
- Invesco Dynamics -55
- Invesco Finl Svcs -75
- Invesco Health Sci -40
- Invesco Technology -50
- nvesco Telecomm -80
- Invesco High Yd -60
Q. What do you make of it all, Don?
A. Well, knowing what we NOW know about September, investors turned outwise to lighten up in August on equity funds and add to bond and MoneyMarket funds. September trends show even more of the same based on limitedsampling. The question is, when we DO hit a bottom in stocks, willinvestors have the courage to buy, or will they take a long time to repairtheir psychology. I suspect the latter. Timing is always hard to do,because people tend to follow the recent trend rather than anticipatechange.
Q. Any sense of what September flows will look like?
A. Well, we get only partial data during the month on a daily basis, butit looks like perhaps $15-20 billion in outflows for equity funds, and thefinal numbers of course depend on market action and any world news thesenext couple of trading days.
