The pace of equity mutual fund buying slowed this month amid mounting concerns about the health of the U.S. stock market, fund companies said.
Many of America’s biggest fund companies, including Vanguard Group, T. Rowe Price Associates Inc. and Janus Capital Corp., said inflows were down as much as 50 percent this month from February when about $18.45 billion poured into stock funds.
Fidelity Investments, the No. 1 U.S. fund group, reported even worse results. The Boston-based company said it expects net inflows to its equity funds to be flat this month, compared with $2 billion of net inflows last month. The company’s flagship Magellan fund continued to suffer net outflows.
Thursday, fund groups, including Janus, said investors reacted to the 2 percent decline in the stock market by moving a bigger portion of their assets to low-risk money market funds. The Dow Jones Industrial Average fell 140.11 to 6,740.59 Thursday, and has fallen 4.9 percent since its record close of 7,085.16 on March 11.
“Cash flow in the equity area is about half what it was in February and low-risk money market funds are attracting twice what they did in the prior month,” said Steve Norwitz, vice president of T. Rowe Price.
As for bond funds, companies said inflows were lower than February. The Investment Company Institute reported today that about $2.17 billion was invested in February, compared with $3.4 billion in January.
The slowdown in equity fund purchases comes at a time when the 6-1/2-year bull market rally is showing signs of cracking.
The market’s decline is linked to concerns about the outlook for corporate profits, especially in the technology industry, and rising interest rates. The Federal Reserve moved this week to raise the overnight bank lending rate by a quarter point, the first rate increase in more than two years.
To be sure, the first two months of this year were big months in terms of cash inflows for equity funds. A record $29.1 billion poured into stock funds during January, according to the ICI, the industry’s trade group in Washington.
The average stock fund had about 5.7 percent of its assets in cashrelated accounts at the end of February, unchanged from the prior month, the ICI reported.