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Money Management Executive

Investors Fail to React to Fund Investigation

Published September 15, 2003, 1:00 a.m. EDT
1 Min Read

Despite New York Attorney General Eliot Spitzer’s investigation into potentially illegal and illicit trades by four mutual fund companies, the investing public – at least so far – is turning a deaf ear, Reuters reports. Investors’ willingness to pour money into equity funds is evidently driven by performance; year-to-date, the average equity fund is up 25.6%, according to Morningstar. TrimTabs.com estimates that stock funds have continued to see net inflows every day since Spitzer announced his investigation on Sept. 3. Spokespeople for Fidelity and T. Rowe Price both told Reuters that inflows have continued at a very strong pace.

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Spitzer has since asked for trading information from 80 fund companies, and the Securities and Exchange Commission is conducting its own probe. Although hedge fund Canary Capital Partners paid a $40 million settlement with the attorney general’s office, no charges have yet been levied against fund companies.

However, Affiliated Managers Group Chief Executive Officer William Nutt told Dow Jones he fears the industry’s reputation is at serious risk. Because the case seems to indicate that at least some fund companies are willing to give preferential treatment to large, institutional investors, the industry may lose its "credibility," Nutt said.


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