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Index-500 Heads the List

The Vanguard fund remained buyers' favorite in the first quarter, but Janus Worldwide zoomed to No. 2 as Americans invested more abroad.

May 20, 1997|From Bloomberg News

BOSTON — In terms of sheer dollar volume of money flowing in, no other mutual fund came close to matching the first-quarter take of the gargantuan Vanguard Group Index-500 Portfolio, a new tabulation shows.

But in a sign of Americans' increasing desire to invest overseas, a global stock fund was the second-most-popular fund in the first quarter.

And despite its well-publicized management problems, Fidelity Investments had the No. 3, No. 4 and No. 5 funds in the quarter, ranked by net cash inflow.

A study by Boston-based Financial Research Corp. shows that a net $2.67 billion poured into the Vanguard fund, which seeks to mimic the performance of the Standard & Poor's 500-stock index. That is $1 billion more than any other fund attracted for the three months ended March 31.

The popularity of S&P 500 index funds has soared over the last two years as the blue-chip stocks that dominate the index have far outperformed most other U.S. stocks. Vanguard's fund is the granddaddy of index funds and now boasts of $37.2 billion in assets.

The fund is second in size only to Fidelity's Magellan fund, with $53 billion in assets.


Yet in recent months, the cash flow into the Vanguard index fund has slowed, the Valley Forge, Pa.-based company says.

Index-500 "was taking in about $50 million a day at the start of the year," said Brian Mattes, a spokesman for Vanguard. "Now it's closer to $30 million a day. At that rate, the fund will attract more than an additional $7 billion this year."

It took in $8 billion in 1996.

Meanwhile, American investors, having seen the U.S. stock market rally for 6 1/2 years, are beginning to shift more of their assets to funds that specialize in investing abroad, data show.

Janus Capital Corp.'s Worldwide fund rocketed to second place in the first quarter in terms of net cash flow, attracting about $1.57 billion. It had been the 12th-most-popular fund in 1996.

Janus said the assets of the Worldwide fund have almost quadrupled since the end of 1995, to $7.74 billion now.

The fund, managed by Helen Young Hayes, has the numbers to support its popularity: Through March 31, the fund's three-year performance ranked third of 97 global stock funds tracked by Lipper Analytical Services, with a 70% total return.

(The top global fund, in performance, over the last three years was the tiny Pasadena Global Growth A, up 91%, according to Lipper. Dreyfus Premier Growth A, up 72%, was No. 2.)

"Janus has done a great job with [Worldwide] fund," said Tim Medley, an investment advisor in Jackson, Miss. "I'm concerned, though, [whether] the fund will be able to maintain its strong performance given how big it's getting."

It's more difficult to manage a big fund because the individual stock positions are bigger and sometimes it's harder to trade larger blocks of stock, Medley said. "We'll know before long whether Janus Worldwide is hamstrung by its own growth."

Janus attributed the growth of its Worldwide fund to a combination of top-notch performance and heavy advertising. Ads for Janus Worldwide and Janus Overseas have appeared regularly in national magazines. The company said it also sent direct mailings to current Janus investors who didn't own the two funds.

The other global fund on the first-quarter top 10 list for net cash flow is Templeton Foreign. It attracted almost $880 million in net inflows.


Rounding out the list of the first quarter's most popular funds are three Fidelity funds: Growth & Income, at No. 3, with $1.51 billion in inflows for the quarter; Low-Priced Stock, at No. 4, with $1.05 billion; and Contrafund, No. 5, with $1.03 billion.

Despite high turnover among its fund managers last year and other snafus, Fidelity remains by far America's biggest fund company.

Meanwhile, three stock funds that were among the 10 bestsellers in 1996 fell off the list in the first quarter, Financial Research said.

PBHG Growth, Putnam New Opportunities and AIM Constellation--all three of which invest in smaller growth stocks--had been red-hot in the first half of last year as those stocks soared. But investors turned cool toward the funds this year, as smaller stocks in general fell far more sharply than did blue-chip issues in the winter and spring market downturn.

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