Despite New York Attorney General Eliot Spitzers 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.
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 generals 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 industrys 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.