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INDIVIDUAL INVESTORS INCREASINGLY USING MUTUAL FUNDS AS VEHICLES TO INVEST IN DEBT INSTRUMENTS, SIA STUDY SHOWS

 /ADVANCE/ NEW YORK, Dec. 17 /PRNewswire/ -- Mutual funds, one of the most popular vehicles through which individuals invest in equities, over the years have become a significant mechanism through which individuals are able to invest in other financial instruments, according to a Securities Industry Association analysis of data since 1970.
 Since 1985, government and corporate debt instruments have been the single largest investments held by mutual funds, with equities placing second, according to the study by Jeffrey M. Schaefer, SIA senior vice president, research; George R. Monahan, director of industry studies; and Grace Toto, statistics director.
 The study also showed equities continued throughout the period to be the largest single investment of private pension funds, but the second largest investment of public pension funds compared to combined corporate and government debt.
 However, if current trends continue, equities will become the largest asset for public pension funds, the researchers said.
 At the end of the second 1992 quarter, mutual fund holdings of equities stood at 44.1 percent of their total liquid financial assets, while government and corporate debt instruments accounted for 54.4 percent, the SIA researchers said in the current issue of "Trends."
 Although mutual fund holdings of equities in the second quarter were up slightly from 40.5 percent in 1990, stock holdings relative to other assets are down from 88.6 percent in 1970, 73.1 percent in 1980 and 48.2 percent in 1985, the SIA economists said.
 U.S. Government Securities Holdings Rose
 By contrast, United States government securities accounted for 22.2 percent of holdings in the quarter, down from 23.9 percent in 1990, and 27.5 percent in 1985, but up from only 2 percent in 1970, the analysis showed.
 Municipal securities, at 17.7 percent at mid-year 1992, were down from 18.9 percent in 1990, but up from 14.2 percent in 1985 and zero in 1970.
 Corporate bonds ranked third in the debt group, at 14.5 percent in the second quarter, down from 15.2 percent in 1990, but only slightly less than its 14.7 percent showing in 1980 and almost double its 1970 level of 7.8 percent.
 Bank instruments remained virtually constant at less than 2 percent throughout the two-decade-plus period.
 Discussing the changes, the SIA economists noted, "when bank account interest rates were fixed in the 1970s, mutual funds attracted many investors by offering money market funds as an alternative to certificates of deposit and time deposits."
 "This eventually forced even banks to argue for the unfixing of interest rates despite knowing that this would impact adversely on profit margins."
 "Eventually, mutual fund complexes and securities firms saw an opportunity to increase investor yields by offering funds of longer-term fixed income securities and short-term money market instruments to supplement equity mutual funds," they said.
 Equities Continue Top Investment At Private Pension Funds
 In the analysis of various asset gathering institutions, SIA's economist also found at mid-year 1992 equities made up 58.6 percent of private pension fund liquid financial assets, about the same as it has been since 1980, but down from 65.7 percent in 1970.
 U.S. government securities and corporate bonds accounted for 27.3 percent of holdings at quarter-end, down from 29.3 percent in 1990, 31.2 percent in 1985, 32.8 percent in 1980 and 31.7 percent in 1970.
 However, holdings of mutual fund shares rose to 4.3 percent at mid- year from less than one percent in 1970, SIA said.
 Equities Growth Seen At Public Pension Funds
 At public pension funds, equity holdings have continued to grow, to 46.1 percent at mid-year from 18.6 percent in 1970. Equities holdings in 1990 were 41.6 percent.
 But holdings of government and corporate bonds at quarter-end accounted for 51.8 percent of their liquid financial assets.
 "Surprisingly, public pension funds, unlike private pension funds, haven't used mutual funds or money market funds to participate in the equity or fixed income market," the SIA economists noted.
 And, "by far, the most dramatic change in the composition" of their liquid financial assets has been the reduced emphasis on corporate bonds which totaled only 21.3 percent at mid-year 1992 compared to 64.5 percent in 1970, 50.5 percent in 1980, 33.1 percent in 1985 and 24.9 percent in 1990.
 Neither public nor private pension funds had significant holdings of municipal securities throughout the period studied because of their tax- exempt status.
 Life Insurance Companies De-Emphasize Equities
 The study also showed life insurance companies have made significant changes in their investment holdings by de-emphasizing equities and increasing relative holdings of U.S. government securities.
 Since 1980, the most dramatic change has been in corporate bond holdings, which fell to 56.6 percent at mid-year 1992 from 74.7 percent in 1970 and 70.1 percent in 1980.
 -0- 12/18/92
 /CONTACT: Art Samansky or Karen San Antonio of Securities Industry Association, 212-608-1500/


CO: Securities Industry Association ST: New York IN: FIN SU:

TM -- NY075 -- 8004 12/17/92 23:06 EST
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