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Investors pour into U.S. funds

Dow Jones with files from staff

NEW YORK -- Investors poured $217.35-billion (U.S.) of new money into U.S. mutual funds last year, up 79 per cent from $121.23-billion in 2002, the Investment Company Institute reports.

Thanks to the combination of market appreciation and strong net sales, total assets invested in stock and bond funds surged 16 per cent from a year earlier to $7.41-trillion, said the ICI, the primary trade group of the mutual fund industry.

The inflows into U.S. mutual funds are in stark contrast to the trend in the Canadian mutual fund industry last year. Earlier this month, the Investment Funds Institute of Canada reported that the Canadian industry had net redemptions totalling $606.6-million (Canadian) in 2003, the first year since 1988 that the industry saw more money pulled out by investors than put in. Net outflow from Canadian stock funds totalled a record $2.4-billion for the year.

Total assets in Canadian mutual funds were $438.9-million at Dec. 31, up 12.1 per cent from a year earlier, thanks to rising markets.

As stock markets rebounded strongly, much of the investor money in the United States headed into stock funds, which posted $152.77-billion (U.S.) in net inflows.

This represents a sharp improvement from net outflows of $27.75-billion in 2002, and the best result since 2000, when stock funds pulled in a record $309-billion.

Bond funds, meanwhile, saw net inflows shrink sharply to $31.4-billion, down 78 per cent from $140.34-billion in 2002, a boom year for fixed-income markets. Hybrid funds, which invest in both stocks and bonds, reported net inflows of $33.18-billion, up from $8.62-billion in 2002.

As many investors shunned their low yields, money-market funds lost $259-billion in net redemptions last year, compared with $46.67-billion of outflows in 2002.

In December, stock funds snared $14.74-billion, down marginally from $14.93-billion in November. While the ongoing mutual fund scandal has hurt fund sales at some of the firms involved, many fund companies have been reporting robust sales in recent months.

Bond funds had an outflow of $2.86-billion, slightly larger than the November outflow of $2.65-billion. Outflows from money-market funds totalled $22.83-billion in December, wider than the $7.55-billion outflow in November.

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