Rising Mutual Fund Purchases Offset by Shareholder Exodus

Total purchases of stock and bond mutual funds continued to soar in March, but a surge in the number of shareholders cashing out caused the funds’ net cash inflows to decline from February’s record levels.

The Investment Co. Institute, trade group for the fund industry, said Thursday that new purchases of stock and bond funds reached $32.5 billion in March, up from $27.8 billion in February and $15.8 billion in March, 1991.

But redemptions by shareholders leaving the funds totaled $15.5 billion in March, compared to $11.6 billion in February and $9.1 billion in March, 1991.

The stock market took a tumble in March after a sharp rise early in the year. That decline encouraged some fund shareholders to quit the funds. Likewise, rising interest rates hurt the value of bond fund shares in March and slowed investor purchases.

Net cash flow--purchases minus redemptions, plus or minus net exchanges among funds--was $7.4 billion for stock funds in March, down from $7.6 billion in February.

For bond funds, the net cash inflow figure was $8.9 billion, versus $9.7 billion in February.

Although fund cash inflows have slipped, they remain at two to three times the levels of a year ago--a measure of individuals’ continuing strong desire to get out of bank savings certificates and other low-risk accounts in favor of stocks and bonds.