Cheryl Winokur, Matt Ackermann, and Stephen Kleege contributed to this article.
Market volatility threatens to slow down banks' mutual fund sales as well as their capital markets business.
Equity investors have fled big banks and investment firms on the theory that the capital markets activity that boosted their first quarter results will dry up in a jittery stock market. That selloff continued Thursday, helping send the American Banker index of big banks 2.07% lower, and clobbering shares of some major investment firms, as investors reacted to economic reports that suggested the Fed would continue to raise interest rates to stave off inflation.
At the same time, new figures showed that growth in mutual fund investment was tapering off even before this month's market gyrations. Net inflows into stock and bond funds fell 40% last month, to $18.8 billion, from $31.3 billion in February, according to Financial Research Corp. of Boston. The monthly survey measures net cash flow, which takes into account sales, redemptions, and exchanges.
The Financial Research survey estimated net inflows to mutual funds in the quarter of $68.1 billion, up from $50.9 billion in the first quarter of 1999. Growth and technology funds led to strong domestic equity fund sales in March. Domestic equity fund sales totaled $59.2 billion in the quarter and increased $11.5 billion in March.
Financial Research also noted $25.5 billion of outflows from bond funds in the quarter, compared with $19.8 billion in net inflows in 1999.
A report by the Investment Company Institute said mutual fund assets rose 3.4%, to $7.294 trillion in March.
Several bank fund managers said business is holding up well.
April is always a great month for fund companies, said Michael C. Vessels, senior vice president and national sales manager of bank brokerage sales at Aim Management Group of Houston.
He noted that investors tend to wait until the last minute before the April 15 tax-filing deadline to contribute money to their individual retirement accounts.
March sales were also strong at Aim, the second largest seller of mutual funds through bank brokerages in 1999. They were up 20% over February, Mr. Vessels said.
March was a record month for mutual fund sales at KeyCorp of Cleveland's brokerage arm, said William Dent, senior vice president and director of asset advisory services at McDonald Investments. Fund sales were up about 50% over February. Mr. Dent attributed that partly to seasonal factors such as bonuses and people investing their tax refunds.
And despite market volatility, Mr. Dent said April is shaping up to be a pretty good month for fund sales, but not as good as March. "When you have a setback in the market, people don't have the liquidity, perhaps, to invest in new opportunities," he said.
Ron DiCicco, senior managing director of Comerica Securities Inc., the brokerage arm of Detroit's Comerica Inc., said gross sales were up 15% in March above February, and up 75% from March 1999.
He said April sales are also strong, though he also expects them to be off from March, which was the best sales month of the quarter for Comerica.