The value of the assets held by mutual funds around the world declined by 7.9 per cent in the third quarter of 2002 to $10.65 trillion says the Washington-based Investment Company Institute (ICI). The third quarter decline in worldwide mutual fund assets primarily reflected global weakness in equity prices. Stock price indexes in virtually every one of the reporting countries moved lower in the quarter, with most decreasing more than 10 percent and some between 20 and 40 percent.
In this environment, equity fund assets fell 17.5 percent, with 29 reporting countries posting declines. At the end of the third quarter, assets of equity funds were $3.972 trillion, down from $4.816 trillion at the end of the second quarter. Also contributing to the decline in equity fund assets in the third quarter was a net outflow of $64 billion from these funds. The outflow was largest among U.S. equity funds, but European equity funds also experienced a net outflow. In contrast, equity funds in Asia-Pacific countries recorded a net inflow, largely reflecting net sales by exchange-traded funds in Japan. Despite the outsized drop in stock prices, the net outflow for all countries was relatively small, amounting for the quarter to only 1.6 percent of average assets for the 25 countries reporting net sales.
Balanced/mixed funds, which invest in stocks and bonds, also felt the effects of the retreat in stock prices. Assets of these funds fell 10.1 percent in the third quarter to$855 billion. The decline was broad-based, with all but one of the reporting countries posting decreases. Balanced/mixed funds recorded a net outflow of $14 billion in the quarter. Assets of bond funds increased 2.6 percent in the third quarter to $2.395 trillion. Net sales of these funds were $48 billion in the quarter, reflecting strength in the U.S. and Europe.
Bond funds in the Asia-Pacific region recorded an outflow, extending a development that began in the last half of 2001. Assets of money market funds declined 0.3 percent in the third quarter to $3.016 trillion, reflecting an outflow of $27 billion from these funds. European money market funds continued to experience strong inflows during the third quarter. In the U.S., however, institutional investors reacted to the low level of yields on money funds by shifting to higher-yielding open-market instruments.
At the end of the third quarter, assets of equity funds represented 37 percent of all worldwide mutual fund assets, down from 42 percent at the end of the second quarter. The asset shares of money market and bond funds were up slightly in the third quarter. The number of funds increased 1.1 percent in the third quarter to 52,988. The composition of the number by type of fund, however, was largely unchanged.
The ICI compiles worldwide mutual fund statistics on behalf of the International Investment Funds Association, an organization of national mutual fund associations.