Yet, mutual fund investors have shown little, if any, aggregate net reaction, perhaps because investors pulled cash out of funds with problems and reinvested it in other mutual funds. In the three months before September, when the New York Attorney General first publicly described the trading abuses, $ billion on net was invested in long-term mutual funds.
Net investment actually increased in the next three months, to $ billion. Why didn’t the scandal cause a large pullback from the mutual fund industry? The recent strength of the stock market is part of the explanation.