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Equity Funds Lose Allure

Money flows out of 2003's hottest sectors.

Equity funds ended six weeks of inflows -- at least according to one of the two major tracking firms -- for the week ended May 5.

Fund tracker AMG Data Services reported net cash outflows of $14 million from stock funds for the period. Meanwhile, TrimTabs, a rival fund flow tracking firm, reported net inflows of $1.1 billion into equity funds with $600 million going into U.S. companies.

TrimTabs president Charles Biderman discounted the small billion difference between the two firms results saying, "When you are tracking $3.5 trillion in assets $1 billion is statistically insignificant given the size of the fund flows."

TrimTabs data also showed a net outflow of $400 million from bond funds, as investors continued to fret about higher interest rates.

AMG reported that inflows to domestic equity income funds of $256 million and aggressive growth funds of $216 were offset by outflows from some of the strongest sectors in 2003. Small-cap growth funds, for example, saw outflows of $272 million, real estate funds lost $187 million and financial/banking funds saw outflows of $116 million. In the prior week, AMG reported overall stock fund inflows of $1.6 billion.

Emerging markets equity funds, another one of 2003's top performers, reported outflows totaling $411 million, the second largest outflow on record from the sector, according to AMG.

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Taxable bond funds reported net cash inflows of $47 million. In this category, inflows to Treasury funds and flexible funds -- $318 million and $322 million, respectively -- were mitigated by outflows from investment grade and high yield corporate bond funds -- $223 and $201 million, respectively.

Money market funds reported outflows of $4.4 billion, with tax-exempt money market funds reporting inflows of $1.1 billion.

Biderman expects more money to head into money market funds or even "regular old savings accounts" as more people flee bonds and equities ahead of the


inevitable move to raise interest rates.

AMG reported municipal bond funds reported net cash outflows of $558 million.