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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (1211)10/3/2003 12:07:32 AM
From: HighProb  Read Replies (1) of 110194
 
More on this subject:

Fed-up fund investors shut their wallets

The amount of money flowing into funds dropped 70% in the weeks after major players were accused of cheating investors. It's no coincidence.

By Timothy Middleton

The New York attorney general’s bombshell assault on mutual fund fraud may well have turned off the spigot on flows of funds to the industry. The stock market weakened immediately after Eliot Spitzer alleged that key industry players had taken unfair profits, choking off a rally that had seen major benchmarks rise in double digits this year.

In the aftermath of Spitzer’s filed complaint, scores of lawsuits have been filed or threatened against the accused fund complexes. But the scandal’s damage could be far worse -- a spreading lack of confidence in funds, which could translate into shriveling demand for common stocks.

The Spitzer lawsuit -- alleging after-hours trading arrangements that created unfair profits for several hedge fund and mutual fund companies -- was announced Sept. 3. In the seven days ending on that date, equity funds had attracted $4.2 billion in net inflows, according to AMG Data Services. Funds had been attracting rising flows for months: $17.4 billion in July and $18.1 billion in August.

But flows in the three following weeks, ended Sept. 24, “together did not equal that first week,” says Robert Adler, AMG’s president. The average was $1.2 billion in each of those three weeks -- a plunge of more than 70% in the industry’s new assets.

In the aftermath of news of the worst scandal in the history of funds, Adler says, “It’s safe to say equity flows are diminishing.”

Rest of article here:
moneycentral.msn.com
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