Investor demand for single-state tax-exempt mutual funds continued to outpace demand for national funds through the third quarter of 1993, according to data from the Investment Company Institute.

Net sales of single-state municipal bond funds increased by 51.5% during the first nine months of 1993, to $17.86 billion. National funds saw a smaller 41.7% increase, to $19.16 billion, the mutual fund trade group said.

Overall, net sales of long-term tax-exempt mutual funds increased by 46. 1 % during the first nine months of 1993, as investors picked up $37.02 billion of mutual fund shares during the period. In comparison, buyers had an appetite for $25.35 billion last year.

Net sales comprise new money and reinvested dividends, minus redemptions.

Strong investor demand has caused assets of the municipal funds to grow faster than those of taxable funds, said John Collins, a spokesman for the institute.

All long-term tax-exempt mutual funds had assets of $247.5 billion in Sept. 30, a 33.1% increase from last year. Assets of single-state funds grew 37%, to $1 10 billion.

All long-term bond funds, taxable and tax-exempt, grew at a 32% annual rate during the first nine months of the year, to $733.4 billion, Collins said.

Tax-exempt funds "are growing faster than the bond funds in general," Collins said.

There has also been strong growth in the total number of municipal funds, Collins said.

National municipal funds increased by 42 to a total of 252 funds, by Sept. 30, a 20% rise. Single-state funds rose by 28% to 488, as 107 new funds began reporting statistics to the institute.

Net new cash flow into state funds was steady for the first three quarters, but cash flowing into national funds declined, the institute data show.

Net new cash flow is made up of net sales combined with net exchanges. Net exchanges represent the balance between deposits shifted to or from a fund from others in the same family.

Net new cash flows into single-state funds were relatively steady at $5.7 billion during the first quarter, $5 billion in the second quarter, and $5.1 billion in the third quarter.

National funds saw $6.1 billion of inflows during the first quarter. Inflows decreased to $5.6 billion in the second quarter and $4.8 billion in the third quarter.

As measured by net exchanges alone, long-term funds lost about $445.8 million during the third quarter, Collins said, and single-state funds lost $77.1 million.

"It's an indication that [investors] wanted to be elsewhere," he said.

Equity funds are one area that has been drawing more investors.

At Dreyfus Corp., net sales of equity funds have increased 50% from last year, a spokeswoman said. At least two funds in the sector have posted gains of more than 300% over a year ago, she said.

High demand also continues for Dreyfus' tax-exempt funds as the sector remains the firm's strongest mutual fund category, a spokeswoman said.

Net sales for Dreyfus' intermediate municipal bond fund are up 65% this year. During October, sales logged a 112% increase from September, the spokeswoman said.

Despite the high demand for tax-exempt securities, net sales of the Dreyfus municipal funds group have fallen 34.9% this year. The firm attributes the decrease in net sales to a rise in investor redemptions of mutual fund shares from October 1992 through October 1993, the spokeswoman said.

At T. Rowe Price Associates, net new sales, or new sales minus redemptions, of the firm's tax-exempt funds total 63% of its total mutual fund sales, compared with only 23% for the same period last year, a spokeswoman, Rowena Itchon said.

According to an analysis by the Investment Company Institute of a recent investor survey, relatively few individuals used the proceeds from certificates of deposit as the source of money for their most recent investment in stock or bond mutual funds.

Fewer than 6% of individuals who invested in stock and bond mutual funds between July 1991 and July 1993 used proceeds from maturing certificates of deposit, the institute said.

Many new investors, 43%, said cash for investing came from current sources such as bonuses, cash reserves or tax refunds. Only 5.3% used proceeds from certificates of deposit.

Among seasoned investors, 37% used current income to make recent long-term mutual fund investments, 44% used proceeds from other investments, and 5.7% used money from maturing CDs.

The data were compiled through a telephone survey of households by Phoenix-Hecht, a polling organization.

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