After playing second fiddle to the high-flying money-market mutual funds for a few years, the equity funds are suddenly finding themselves moving toward center stage for the investing public.
Throughout the financial industry, in fact, the message is clear: The 1980s may be shaping up as the decade of "equities."
* Investment managers with large equity funds are slowly starting to consider reinvesting more and more of their large "liquid" holdings into equity portfolios. Whether they are in fact doing so in significant amounts will not be known for another month or so, when more up-to-date industry figures will be available.
But given the high "cash to asset" ratio now prevailing for equity funds, the possibility of a shift of liquid assets into stocks is exciting for the market.
* Leading market authorities are taking to the airwaves and popular press to urge investors to consider equities again. In the Sept. 15 U.S. news & World Report, for example, Princeton University economist Burton Malkiel argues that this may well be the "best opportunity" in a quarter- century to buy common stocks. In the September issue of Money magazine, Louis Rukeyser of public television's "Wall Street Week" says the same thing -- that the 1980s will be the "decade" for common stocks.
During July, the latest month for which complete figures are available, equity fund sales reached $470 million. that is a 26 percent increase over the previous month. Monthly redemptions were $417 million, which meant equity funds closed out the month on the plus side.
More significantly, according to a spokesman for the Investment Company Institute, the main trade arm for the mutual funds, sales of equity funds in July of this year were the "highest since April 1969." That alone, the spokesman said, underscores the growing public perception that this is again the time to consider common stocks.
For the first six months of 1980, sales have increased 50 percent over 1979 levels. Counting in the July data, the total asset value of equities funds was
Investment analysts traditionally differentiate equity funds in four ways: aggressive growth funds, growth funds, growth and income funds, and balanced funds (which invest in stocks and some bonds).
One current bustling category of equity issues is the aggressive growth fund area, which registered sales of $173 million during July alone.
One big question asked by investment analysts is to what extent fund managers are starting to plow some of their large liquid holdings (in short-term debt issues, for example) back into the market itself. That is considered important, because a larger "plowback" tends to underscore the perception that even fund managers now see the market as more auspicious for common stock issues.
Signals appear mixed, but there is some feeling here that fund officials are slowly starting at least to consider reinvesting a larger percentage of their liquidity.
During July, the liquid-asset ration for equity issues (in both equity and balanced funds, the latter including some investment in bond issues), was 10.4 percent. That compares with 10.1 percent for the previous month. Statistics that might show whether this minor shift has been reversed in later months are not yet available.
Talks with some investment managers, however, suggest that there is now a closer consideration than during recent months about "reinvestment." But caution is still the operating guideline for most investment managers.
"Cash as a percentage of assets for the industry is very high," says George MAteyo, executive vice-president of the Mutual of Omaha Growth Fund Inc.
Most important, he says, the long haul for the market "looks very favorable for common stocks." For that reason, he asserts, investment managers are taking a hard look at putting larger percentages of their assets into equities. But the current energy problem (the likelihood of an OPEC oil price increase), plus such factors as continuing inflation and the presidential election, is pushing managers toward a cautious approach in their overall investment strategy.
Our cash position "rises and falls," says Joseph Pecoraro, investmen manager of the Hamilton Growth Fund. But for the long haul, he says, equity issues look promising for the 1980s.