Investors plunged back into stock mutual funds after pulling billions of dollars from them in August, and industry experts are hopeful the money will keep flowing this year.
Executives at mutual fund companies are optimistic over what they have seen in 1999.
"The fund flows have been phenomenal," said Raymond A. "Chip" Mason, chairman and chief executive at Baltimore-based Legg Mason Inc., a diversified money management firm. "It has been wonderful."
Assets in Legg Mason's 18 mutual funds have shot up to $15.4 billion under management as of Jan. 11, a 64 percent increase from a year earlier. And assets in Legg's hottest performing mutual fund, the Value Trust Fund, have more than doubled to $8.4 billion over the same period, up from $3.65 billion a year earlier.
The money has been flowing into funds run by Baltimore-based T. Rowe Price Associates, too. Assets in T. Rowe's 76 mutual funds jumped 17 percent to $95 billion on Jan. 12, compared with $81 billion the prior year.
"It has been such boom times," said George A. Roche, T. Rowe's chairman and president. "The outlook would be for more growth, but at a slower rate."
Other factors could play into the mutual fund industry's hands this year. Foremost is the strong economy, which has been driven by low inflation, low interest rates and strong consumer spending.
"The forces behind the growth of the industry remain in place," said Brian Reid, senior economist at the Investment Company Institute, a Washington-based trade organization. "The industry is in good shape. It offers diversification at low cost. It is really difficult to beat that."
Another reason for the optimism is investors continue to view mutual funds as a popular way to save money. Reid said there is growing acceptance of mutual funds among younger people in their 20s and 30s.
"I don't see any reasons for that trend not to continue," he said. "Mutual fund growth continues. I think it is because mutual funds specialize in providing diversity."
But both Mason and Roche worry that the mutual fund business could be hurt this year by unforeseen global events that stun the market and shake investors' confidence.
"You never know. It [a surprise] can come from somewhere you haven't thought about," Mason said.
Mutual funds were jolted in August when nervous investors pulled their money out of stock funds because they were afraid that the economic problems in Russia and Japan, coupled with uncertainty about President Clinton's future in office, would derail the economy.
