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US Investors Flock to Mutual Funds

JPM, TROW, BEN, IVZ

Individual investors rushed into stocks and bonds in January, the biggest month on record for deposits into US mutual funds.

“investors should be very careful about the types of funds they are entering, this is not a strong market in fundamental terms” Shayne Heffernan of HeffCap said today.

Long-term funds attracted $64.8-B in the 1st 3 wks of the month, according to the Investment Company Institute. The prior record was $52.6-M for all of May 2009, according to the ICI, the data goes back to Y 1984.

Signs of improvement in the US economy and a rising stock market that pushed the DJIA above 14,000 Friday for the 1st time since Y 2007 have prompted Americans to step up their investments.

Equity mutual funds gathered $29.9-B in January’s 1st 3 wks, more than for any full month since Y 2006.

When the US lawmakers moved beyond the fiscal cliff it unlocked a lot of money according to the chief global strategist for JPMorgan Funds, said in an interview. The unit of JPMorgan Chase & Co. NYSE:JPM manages $367-M.

The US Congress at the start of the year reached a compromise to avoid more than $600-B in scheduled tax increases and spending cuts that could have damaged the US economy severly.

The Standard & Poor’s 500 Index has gained 6.1 on the year this year after advancing 13% in Y 2012.

The 20-member S&P index of custody banks and asset managers is up 11% in Y 2013.

Other asset-management firms have noticed the change in investor behavior.

In January people have moved back into equities,” the CEO T. Rowe Price Group Inc. NASDAQ:TROW, said in a 29 January, It is true for the industry and it is true for us, he said.

At Invesco Ltd. NYSE:IVZ, the owner of Invesco, Van Kampen and PowerShares funds, sales of equity products in January were running 50% higher than in Q-4, its CFO said in an interview Thursday. January has been an extraordinary month in terms of flows coming back into a whole range of products according to Invesco, the firm has $688-B under management.

Money flowed into both international and domestic stock funds in the 1st 3 weeks of January, according to the ICI, whose data for the fourth week will be released 6 February. Domestic equity funds suffered redemptions for the past six yrs as clients fled into fixed income, ICI data show.

Stock funds last attracted more money in March 2006, when they drew $33.1-B. In February 2000, just ahead of the collapse of technology stocks, equity funds won a record $56.3-B, according to ICI data.