U.S. Stock Fund Inflows Bounce Back Up

Investors are again buying U.S. stock mutual funds at a heightened pace after two months of below-average inflows, fund industry trackers said Thursday.

“We saw flows dry up for about 1 1/2 months until last week, when buying resumed at near-record rates,” said Charles Biderman, head of Trim Tabs Financial Services, an investment advisory firm in Santa Rosa.

The Investment Company Institute estimated Thursday that a net $13.5 billion flowed into stock funds last month, up from $10.5 billion in March. The two-month inflows were the lowest since last July and August, the ICI reported.

The stock market rebounded dramatically last week after tumbling in March and April on worries over interest rates and corporate profits.

Analysts note that the typical pattern is that individual investors’ purchases of stock funds slow sharply when the market is falling. But once it begins to rebound purchases pick up again.

So far in May, “we’re estimating that domestic equity funds are attracting inflows at a monthly rate of $27 billion,” Biderman said. “We’re also seeing investors buying aggressive-growth funds at the highest rate this year.”

Charles Schwab Corp. reported that stock funds purchased through its OneSource supermarket program totaled about $782 million in the first seven days of May, compared with $718 million during all of April.

The buying will continue as long as interest rates don’t rise much above where they are, Biderman said. “The stock market is being held hostage by the bond market right now,” he said.

Meanwhile, ICI reported that investors stayed away from bond funds in April, on balance. There was almost no net inflow of money for the month. In March, a net $2 billion had flowed out of bond funds.