Mutual Fund Purchases Sink a Bit During May

Investor interest in stock mutual funds waned a bit in May, although bond funds continued to attract large sums. That trend has persisted through June as well, some fund companies said.

Total purchases of stock and bond mutual funds sank to $26.9 billion in May, from $29.9 billion in April, the Investment Company Institute reported Monday. The group is the funds’ trade association.

Stock funds were mostly responsible for the decline. As the stock market churned in May after sliding in April, many investors took to the sidelines. Total purchases of stock funds fell to $10.5 billion in May from $13.1 billion in April.

But stock funds also reported fewer redemptions in May--a sign that, even if investors were reluctant to buy, those already in the funds were content to stay put. Stock fund redemptions fell to $4.56 billion in May from $5.45 billion in April.

Meanwhile, total purchases of bond funds were $16.5 billion in May, down slightly from $16.8 billion in April.

More significant, the net inflow of cash into bond funds was a strong $8.7 billion, up from $7.4 billion in April. The net-inflow figure is after accounting for redemptions and net exchanges among funds in the same family.

Experts say the continuing allure of bond funds is their high yields compared to what banks and money market funds pay on short-term accounts.

A survey of fund companies by the Bloomberg financial news service Monday suggested that investors in June have continued to pour money into bond funds, while the uncertain stock market outlook has kept stock-fund purchases depressed.