Collective punishment from small mutual fund investors outweighs industry fines

Small investors voted with their feet to move more than $40 billion out of Janus and Putnam since the mutual fund scandals broke in September, The Wall Street Journal reports, citing data from Financial Research Corp.

Punitive measures in the form of stiff fines handed out to mutual fund companies by securities regulators pale in comparison to the collective sanctions imposed by thousands of individual investors who closed accounts and transferred billions of dollars to competitors.

Paul Roye, director of the SEC’s investment management division, added an "I told you so" by saying in a recent interview with the Journal that corporate misconduct leads to shareholder defections.

Although Janus and Putnam’s assets were buoyed by a rising market, institutional investors also contributed to the hemorrhaging of assets by yanking pension plans and corporate accounts. Strong Capital Management, which bled $4.4 billion, or 18% of its stock and bond portfolio assets, and AIM Investments also made the list of firms that suffered heavy losses at the hand of disgruntled investors.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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