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Fidelity sees net investments

in stock funds slowing

BOSTON: Fidelity Investments, the nation's largest mutual fund company, predicted Friday that net investments in its domestic stock funds had slowed for the third consecutive month in April.

Net cash inflows into equity funds are expected to total slightly more than $2 billion in April, down from just over $3 billion in March and $4 billion in February, the company said.

As much as $5.3 billion flowed into the funds in January, said Robyn Tice, a spokeswoman for Fidelity.

Net cash inflow, which measures new investments minus redemptions, is a common barometer of demand for mutual funds.

"Our domestic equity sales slowed slightly in April. We're still seeing a reaction to the market volatility, Tice said.

Tice said investors poured money into stock funds for their individual retirement acounts during the first three months of the year ahead of the mid-April tax deadline. January's strong sales were well above the more than $3.3 billion in domestic inflows into stock funds in November and December.

But the dropoff at Fidelity exceeded a general decline in the industry over the first three months of the year, according to an industry report.

The Investment Company Institute, an industry group, said that cash inflows in domestic stock funds slipped marginally in March to $17.25 billion from $17.53 billion in February.

Charles Biderman, the president of Liquidity Trim Tabs, which tracks cash flows, said the downturn in Fidelity's sales may reflect some of its funds' poor performance.

"Fidelity's large funds are underperforming the market and investors are looking around at other funds," he said.

Fidelity's Magellan Fund, the largest fund in the country with more than $53 billion in assets, has returned just 2.83 percent since the beginning of the year, ranking it 613 out of 628 growth funds, according to Lipper Analytical Services.

Magellan had been hit by its heavy exposure to the bond market the first two months of the year.

Fund manager Jeffrey Vinik cut the fund's holding in equity shares to 65 percent of total assets, its lowest level in nearly 20 years, while raising the bond stake to 19.4 percent at the end of February. Bonds have fared poorly as interest rates have inched up.

Biderman said cash inflows at Fidelity usually match its 19 percent stake in total assets of the mutual fund industry.

More recently, the percentage of cash inflow heading towards Fidelity has slipped to around 10 percent of the total, he said.

"They're losing market share based on their funds' performance," Biderman said.-Reuter