Mutual fund shareholders took $2.3 billion out of stock funds on Oct. 19, but fund managers were able to meet most of the Black Monday redemptions with cash reserves, the mutual fund industry's trade group told the Securities and Exchange Commission yesterday.

To handle the redemptions, the mutual fund managers used $1.5 billion in cash while obtaining about $780 million from the sale of stocks, the trade group, the Investment Company Institute (ICI), reported.

The ICI said a study of mutual fund activity during the stock market collapse "specifically rebuts the stories of massive liquidations which were rumored to have occurred."

The ICI report, a copy of which was obtained by The Washington Post, was based on a survey of 282 funds that invest in stocks. Together these funds had assets on Oct. 19 of $161.3 billion, representing 80 percent of the assets held by all equity funds.

A summary of the ICI findings was contained in a letter to SEC Chairman David S. Ruder from David Silver, president of the ICI.

"We believe the study is the first of any major stock market segment and will begin the process of shedding light on the extraordinary events of that period," Silver wrote.

The SEC and other agencies are now conducting a series of wide-ranging investigations into the events surrounding the market's sudden fall.

The study was begun by the ICI to determine what impact the torrent of selling on Oct. 19 had on mutual funds and to what extent they were forced to liquidate stocks.

The report concluded that the funds' cash position, amounting to about 8.5 percent of their assets, was chiefly responsible for the funds' ability to act as a "shock absorber" and reduce the stress on the market.

"Mutual fund stock market transactions were an exercise of portfolio management and were not forced liquidations," Silver wrote.

The ICI survey, however, did not attempt to find out which individual portfolio managers may have been forced to sell shares to meet redemptions, but relied for its assessment on the overall industry figures.

The ICI report emphasized that the nation's mutual fund shareholders redeemed only a small percentage of their holdings on Oct. 19 and in the days that followed.

On Oct. 19, the 282 funds studied had assets of $161.3 billion. The amount redeemed, $2.3 billion, represents less than 2 percent of the assets, the ICI noted.

The ICI report said that for every $10 of redemptions from stock funds, about $8 was moved by shareholders into money market or mutual funds.

That ratio dropped to about $7 out of $10 during the remainder of the week. "This means that investors who shifted out of equity funds into money market funds have available assets to move back to equity funds when they believe conditions warrant," Silver wrote.

The ICI also reported that the use of stock index futures to hedge mutual fund portfolios from Oct. 16 to Oct. 26 appeared to be modest.

"Of the 282 funds surveyed, 145 had no authority to trade these instruments and of the remainder, only nine actually traded stock index futures on Oct. 16 or Oct. 19," the report said.

During the week of the market collapse, the assets of the 282 funds dropped 22.5 percent, or $36.4 billion, because of the losses in the stocks in their portfolios and the redemptions.