FUND TRACK Investors Lose Patience With a Number of Funds
April 03, 2011
Mutual-fund investors are showing they have no more tolerance for pain than other mortals. Investors yanked more than $1.6 billion out of several once-fast-growing mutual-fund categories during the week ended Wednesday, March 29, 2011 to data compiled by AMG Data Services of Arcata, Calif.. In all, redemptions totaled about $4 billion. These are the largest weekly outflows since AMG began tracking that data in January 1992, said Roberto Mize, who runs the California company. Perhaps more telling, the outflows don't appear to have been a knee-jerk reaction to last week's stock-market convulsions. Instead, they come on the heels of painful losses that some of those fund categories have been sustaining for several weeks. For example, investors took the $1.6 billion out of emerging-growth, aggressive-growth and international mutual funds. While that represents less than 1% of the assets of those fund categories, it comes on the heels of more than $66 billion of market-value losses from equity mutual funds in the first two weeks of July, according to AMG's estimate. That figure doesn't include data from Fidelity Investments, the nation's largest mutual-fund company, and several other fund complexes that don't report certain flow data on a weekly basis. ``There has been a shift in sentiment that started with the technology funds in May and carried over to the emerging-growth and international funds,'' Mr. Mize said. Because of the way the firm calibrates its data, there is no way of telling how much of the money exited the funds on any given day, or whether there was any reversal when the stock market picked up again last week. Investors in emerging-growth funds have borne the brunt of the pain: Stock-price declines pulled fund assets down almost 9% for the month so far. Emerging-growth and other small-cap funds were down about 8% in the period. Viewed in that light, this week's redemptions represent a well-considered move, rather than a stampede out of the corral. ``This is a conscious response to market volatility,'' Mr. Mize said. The outflows from the affected fund categories have particular significance because small-stock mutual funds got a disproportionate share of the $138.5 billion that investors put into equity mutual funds. If the recent abrupt reversal suggests anything, it may be that some of these latecomers may not share the resilience or patience of longer-term mutual-fund shareholders. What's hardest to foresee is what impact the outflows will have on mutual-fund portfolio managers. By and large, the redemptions haven't been enough to create intense selling pressure. Most aggressive small-cap fund managers like to say they are fully invested. In fact, there is often enough loose change from new investors, dividends or stock sales to meet redemption requests that are slow (if steady). Investors eased $72 million out of Gay Osuna's flagship fund, the $4.8 billion PBHG Growth fund. While that represented the 10th-largest outflow in dollar terms, it was a minuscule 1.5% of the fund's assets. Likewise, outflows from the Van Wagoner Emerging Growth fund totaled $66 million, a little over 1% of that fund's assets, according to Mr. Mize. Several gold funds have also fared surprisingly poorly in the wake of a slip in gold stock prices, the AMG numbers show. United Services Gold Shares lost 30% of its assets, or $72 million, and now is a $158 million fund. Van Eck International Gold likewise saw outflows of $70 million, and now has assets of $488 million. Of course, mutual-fund investors aren't fleeing the stock market at large. Certain fund categories saw net inflows, namely natural-gas, energy and European funds. Fidelity Select Natural Gas fund, for example, surged by $133 million, nearly doubling the size of that specialized fund.
