Mutual Funds Withdrawals Continue (FAIRX, FMAGX, AGTHX, EILVX)

Throughout July stock mutual fund capital outflows have continued the pattern established in June, when $18 billion in outflows was logged. Worries over Europe’s debt troubles and the threat of a US debt default got most of the blame. Stock mutual funds saw $1.5 billion disappear last week alone.

Four funds that have experienced significant withdrawals are Fairholme (FAIRX), Fidelity Magellan (FMAGX), American Fund Growth Fund of America A (AGTHX), and Eaton Vance Large-Cap Value I (EILVX).

Fairholme (FAIRX) suffered net outflows of $235 million last week, keeping up its string of five straight months of outflows. The fund has dropped more than $4 billion in assets this year.

Fidelity Magellan (FMAGX) is getting a much needed boost from its holding in Medco Health Solutions, the pharmacy benefits management company that is merging with Express Scripts. Fund outflows so far this year total $2.34 billion.

American Fund Growth Fund of America (AGTHX) may be the biggest loser of all. The fund’s outflows year-to-date total $9.54 billion, but with total assets of $157 billion the fund remains sound.

Eaton Vance Large-Cap Value I (EILVX) dropped about $250 million in assets last week, and the fund has been downgraded by Morningstar from a 3-star to a 2-star rating.

The total outflow from equity mutual funds last week was $950 million according to Lipper. Money flowed toward bond funds and munis, while money market funds experienced withdrawals of $22.5 billion.

Capital flows are heading again toward gold, silver, and equities, where returns are generally better. ETFs, with the exception of the SPDR S&P 500 (NYSE: SPY) which dropped $2 billion last week, are also generally more attractive than mutual funds.

Paul Ausick