The spate of investigations into mutual fund trading practices and intense media coverage has prompted more than one-third of existing mutual fund investors to say they are unlikely to buy mutual funds any time soon, according to a survey conducted by The Lumin Collaborative, a Richmond, Va.-based PR firm. Further, 77% say they would pull their money from any fund they believed violated its fiduciary responsibility.

The survey of 650 mutual fund investors assessed the impact of negative news coverage on targeted companies and brands along with the perception of the overall fund industry. Three out of four investors said that performance is the No.1 criteria for picking a mutual fund, according to the poll. Another key finding was that 57% of the respondents cited reputation as an integral factor in the selection process.

The survey’s respondents also weighed in on what sort of punishment should be handed down with 89% calling for criminal prosecution of trade law violators. Seventy-six percent called for stiffer regulation. And forty-one percent of the respondents believe that the scandal will get worse before it gets better, Lumin reported.

"Elevated attention to mutual fund impropriety has incited tough responses regarding punishment and regulation," said Lumin Chairman Mark Raper. "However, it has not advanced to the stage where people plan to pull their investments en masse." 
Meanwhile, Fidelity Investments and Vanguard , which have remained relatively free from negative press, received the most praise with approval ratings of 94% and 90%, respectively.
Possibly the most alarming trend the survey revealed is that 30% of the participants plan to stay invested in the market but will stop investing in mutual funds as a direct result of the burgeoning fund scandal. In particular, investors named Putnam and Strong as the funds they were most likely to stay away from. Nearly half the respondents gave Putnam and Strong the thumbs down, 47% and 44% respectively. Among those investors, 17% said Putnam was one of the worst fund companies.

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