News Flash- Scandal Fails to Rattle Investors

Even after an entire year of headlines about the mutual fund scandal, most investors are ignorant of the regulatory probes. Of 744 mutual fund investors that Dalbar recently surveyed on behalf of Reuters, 75% were unable to name a single firm that has been named in the scandal. Eighty-six percent said they did not think the scandal had affected their investments in any way. And asked whether the scandal has prompted them to become more knowledgeable about mutual funds, 66% answered no.

"The issue is probably even worse than the numbers would suggest because these are just the people who are willing to admit they don't know," said Lou Harvey, Dalbar president. But this is good news for the mutual fund industry, Harvey added. "Investors for the most part have not lost confidence, and there is no disenchantment with mutual funds as evil institutions." The survey also showed that roughly 50% do not know what market timing is, 57% can't define late trading and 88% have no clue as to what soft dollars are.

Nonetheless, a number of shareholder activists still believe regulators should forge ahead, not least of them John Bogle, Vanguard founder. "This is just the tip of the iceberg," he said. "Much remains to be done, such as setting a federal fiduciary standard that says mutual funds should work in the interest of investors instead of in the interest of their managers."

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Money Management Executive
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