Investors continue to show faith in stock mutual funds despite the industry's trading scandals, pouring cash into equity funds at a pace not seen since 2000.
Equity funds hauled in a net $14.9 billion in November - the ninth consecutive month of positive cash flows - and the inflow might be even higher in December, according to data and estimates issued this week.
Fund flows measure investors' new purchases of fund shares, minus redemptions.
Boosted by the bull market that has reversed three years of losses for stocks and lifted the Dow Jones industrial average back above 10,000, equity funds took in $138.1 billion through the first 11 months, said the Investment Company Institute, the fund industry's main trade group.
That means 2003 could see the best inflow for stock funds since 2000, when they lured a record $309.4 billion. In 2002, investors redeemed a net $27.7 billion, ICI data show.
In December, stock fund inflows may "approach or exceed $20 billion," said Robert L. Adler, president of AMG Data Services in Arcata, Calif. That would make this the best December for equity fund flows since 1999, when $24.9 billion poured in.
Investors are focused on the rising stock market and the improving economy, Adler said.
Two fund firms whose reputations have taken hits in the trading scandals, Putnam Investments and Janus Capital Group Inc., have suffered redemptions, according to estimates by the consulting firm Financial Research Corp.
Two firms known for their conservative style have topped Financial Research's sales charts in 2003: American Funds and Vanguard.
Those firms had eight of the 10 best-selling funds in November, including the year's most popular fund, American Funds' Growth Fund of America, which took in $1.8 billion in November and $12 billion in the first 11 months.
Fidelity Investments, the biggest fund company, said the flow of cash into its stock funds in December was running at about the same pace as November, while No. 2 Vanguard Group said December's inflow had been modestly below the previous month's.
Industrywide, although the November inflow was down from October - the year's top month, when a net $25.3 billion piled in - the recent trends have been better than normal for the holiday season.
Surprising some analysts, stock fund inflows have picked up since early September, when the scandals over late trading and "market timing" erupted in the $7.1 trillion fund industry.
The inflows may reflect another major trend. Investors have shifted away from bond funds since June as interest rates have risen from their historic lows.
Bond mutual funds had net redemptions of $2.5 billion in November, their fifth consecutive month of outflows, the ICI said.
After attracting a record $140 billion in 2002, bond funds took in a net $34.4 billion in the first 11 months of 2003.
Market interest rates have been rising since hitting generational lows in June, depressing total returns in the sector as bond prices decline.
The losses could worsen if the Federal Reserve raises its target interest rate this year, as some economists expect.
The Los Angeles Times is a Tribune Publishing newspaper.