OCTOBER 27, 2010, 2:58 P.M. ET.

Mutual Funds Take In $9.52 Billion


By JOHN KELL

Long-term mutual funds had an estimated $9.52 billion of net inflows, or buying, as investors added money to stock funds for a second consecutive week, while hybrid and bond funds continued to bring in cash, according to the Investment Company Institute.

Bond funds have thrived, as they typically do in a lower interest-rate environment, while stock funds had failed to consistently attract new investment for more than a year. ICI posted an inflow streak during the summer in which nearly $50 billion was added to mutual funds, almost entirely on bond funds, before posting outflows at the end of August.

Meanwhile, funds in total have reported seven consecutive weeks of inflows, a combined $41 billion on an unrevised basis. Money had been added to the funds on a net basis for 20 of the past 21 weeks.

For the week ended Oct. 20, ICI reported that stock funds had inflows of $2.02 billion, compared with inflows of $762 million the prior week. U.S. stock funds had $202 million pulled from them, while $2.22 billion was added to foreign funds.

A week earlier, stock funds reported their first weekly increase since early May, ending a 23-week streak that saw nearly $92 billion pulled from the funds. The reversal was due to continued flows into foreign-focused funds—emerging markets have been the destination for billions of dollars in so-called hot money of late—while outflows from domestic stocks moderated.

At the same time, bond funds took in $6.48 billion, up from $5.72 billion the previous week, said ICI. Taxable funds had inflows of $5.85 billion and municipal ones added $631 million.

Investors also put $1.01 billion into hybrid funds, compared with prior-week inflows of $1.46 billion. Such funds can invest in both stocks and fixed-income assets. Assets in money-market funds climbed $24.09 billion in the week ended Tuesday, more than rebounding from a steep outflow the prior week, as investors added money to prime and government funds.

Meanwhile, assets in money-market funds climbed $24.09 billion to $2.783 trillion in the week ended Tuesday, more than rebounding from a steep outflow the prior week, according to iMoneyNet.

Taxable funds grew $25.34 billion to $2.457 trillion as institutional investors added $29.21 billion and individual investors took out $3.86 billion. Prime funds, which invest in securities such as commercial paper, had $14.53 billion of inflows, while government funds added $10.82 billion.

IMoneyNet's seven-day yield on taxable money-market funds fell back to the record low of 0.03%, after spending one week at the higher 0.04%. The yield has remained low after the Federal Open Market Committee last month kept the target federal-funds rate for interbank lending in the range of 0% to 0.25%.

Tax-free funds saw $1.25 billion withdrawn from them, putting asset totals at $326.73 billion. Yields at seven-day funds grew to 0.04% but held steady at 0.03% for 30-day funds.

Write to John Kell at john.kell@dowjones.com

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