Frank Sinatra sang that when he was 21, everything came undone. But in 2003, when the mutual fund industry became the "scandal-scarred mutual fund industry," a Sinatra-like downturn that seemed imminent never occurred. In fact, the opposite happened.
According to Lipper, U.S. stock mutual funds rose 30.6% in 2003. In a report released Wednesday, the research firm also predicted that monthly fund flows could reach $200 billion by the end of 2003, making it the second most prosperous year in mutual fund history. It marks the first time in three years that the industry has gained.
Financial planner Pran Tiku told Reuters that most investors were not bothered by the scandal unless they had money in a firm that was under investigation or worse. The chief reason for the rise in fund investing, he said, was the 45-year low that the short-term interest rate is at.
"Very simply, a lot of people finally decided at the beginning of this year that they had enough of sitting in money money market funds earning almost nothing," said Tiku, whose office is in Wellesley, Mass.
A lingering question, however, is whether the fund industry will continue to enjoy gains as the tug-of-war between the overall bullish market and the mutual fund-specific scandal trudges into its second calendar year.