Midyear Stock Mutual Fund Review : The Flow Of Cash Into and Out Of Funding

The flow of money into mutual funds remains spotty, creating doubts about whether the stock and bond markets can do better in the second half of 1994 than they have through the first months of the year.

In a monthly report issued June 29, the Investment Company Institute said net cash flow into stock and bond funds combined was $9.5 billion, compared with $6.5 billion in April and $19.4 in May, 1993.

Investors still showed little enthusiasm for bond funds, which have been hit especially hard by rising interest rates since last fall.

The ICI, a Washington-based mutual fund trade group, reported that May 1994 net cash flow into stock funds was $11.8 billion. Bond funds had a net outflow of $2.2 billion, on the heels of a $4.8 billion drain in April.

The institute defines net cash flow as sales of new fund shares, minus shares redeemed by investors, plus net money that comes into the funds through reinvestment of dividends and exchanges from one fund to another.

“The bond market has experienced a virtual evaporation of public demand for bond mutual funds,” says Michael Metz, a chief investment strategist at the Wall Street firm of Oppenheimer & Co.

By contrast, Metz observes in a report on potential market influences through the rest of the year, “equities have continued to benefit from the fact that flows into mutual funds are holding at high, although under-peak levels.”