America was mesmerized several days ago by how John Jarrell, one of the Lucky 13, would spend the $12 million he won in the Powerball lottery. To William H. Miller III, that's pocket change. Five million dollars a day on average crosses his desk, five days a week, and almost instantly he must decide where that money should go.
Miller, manager of the Legg Mason Value Trust, has seen his fund swell to $6.2 billion in assets under management in just 12 months, more than doubling in size. In July alone, $200 million flowed into the fund, and the money is still pouring in despite last week's swoon when the Dow Jones industrial average plunged nearly 300 points.
He's not the only mutual fund manager swamped by a wave of cash. Well over $100 million in July -- an average of $5 million a day -- has flowed into the T. Rowe Price Blue Chip Growth Fund, and the Flag Investors Communications Fund is getting $1 million a day.
"It has been phenomenal," said Raymond A. "Chip" Mason, chairman and chief executive of Baltimore-based Legg Mason, and Miller's boss. "It has been terrific."
Certificates of deposit and bank savings accounts once were the staples for many investors. But they have given way to the more risky, but lately more rewarding mutual funds.
This year, an average of $42.6 billion of new money has poured into mutual funds each month, according to the Investment Company Institute, a Washington-based trade association for the industry.
That amounts to $255 billion in the first six months of the year, easily surpassing the $152.8 billion invested in the first half of last year.
Investors have embraced mutual funds because it is an easy way to play the market, and the rewards can be big.
"Investors are attracted to where the strongest returns are," said John D. Rea, chief economist at the ICI. "There is a great concern for investing for retirement."
The industry's size has exploded to $5.1 trillion in assets, about 20 times the size of the Defense Department budget and larger than Japan's gross domestic product last year.
Even the number of mutual funds has swelled to 9,566 this year, according to CDA/Wiesenberger, a Rockville-based mutual fund tracking service.
The challenge for fund managers is to put all that money to work quickly and profitably. Despite what is at stake, most take it in stride.
"I don't feel the pressure that I've got to do something because the money is there," said Bruce E. Behrens, co-portfolio manager of Baltimore-based Flag Investors Communications Fund, which has $1 billion in assets under management.
"We really try to handle this like we are going to make money on each dollar we invest. I would say we are pretty selective on where we will put those dollars."
About $20 million a month is coming in. Behrens quickly invests it in large, fast-growing companies such as SBC Communications Inc., America Online Inc. and WorldCom Inc., which make up a sizable portion of his portfolio of 33 stocks.
He is so confident about those companies that he is willing to pump more money into them, especially when their prices slip. He also looks for bargains, especially among smaller technology companies that have been beaten up, or are in turnaround situations, such as software maker Novell Inc.
Miller of T. Rowe Price, on the other hand, recently let his cash position build, only to begin buying stocks in recent weeks as the market started falling. He looks at investing in companies he already holds in his portfolio and for new names that have fallen out of favor.
"Investing fund flows into a declining market is one of the most exhilarating things you can do," Miller said.
Miller likes to put the money to work as quickly as possible. He's holding about $500 million in cash, but when the market stumbles he can use the war chest to scoop up beaten-down stocks.
"We don't like to hold cash," he said. "We only do that as a temporary measure to have some firepower to buy things."
Miller's portfolio, which returned nearly 24 percent for the first half of the year, has about 40 stocks. Many of the companies are large ones, such as Dell Computer Corp., Kroger Co. and America Online, so the money can be put to work quickly.
"The ultimate thing Bill has is the decisions he's got to make," Mason said. "There are an awful lot of very bright people who have trouble coming to the right conclusion. They can't pull the trigger. Bill sees it, he makes the decision, he goes."
Larry J. Puglia, manager of Price's Blue Chip Growth Fund, which has $3.5 billion in assets under management, has a "watch list" of stocks he follows daily. He always knows how much money is coming into the fund, too, because each morning he receives a green sheet of paper showing him the flows.