Flight to Quality Benefits Three Fund Firms
FINANCIAL PLANNER Joseph Lyons recently moved client assets out of a Putnam Investments mutual fund whose manager allegedly made improper trades in its shares. Mr. Lyons didn't move it out of the stock market. He chose another stock mutual fund, managed by Morgan Stanley.</br></br>Like many others, he wants to avoid funds tainted by the sprawling mutual-fund trading scandal that erupted in early September, but he isn't giving up on stocks. It's hard to resist a market that seemingly keeps going up. Enthusiasm for stocks pushed the Dow Jones Industrial Average through the 10000 mark yesterday, the highest level in 18 months.</br></br>After a family discussion of the issues, 43-year-old Mr. Lyons, who works with investment firm Linsco Private Ledger, in Walnut Creek, Calif., shifted his wife's retirement holdings from several Putnam Investment funds to some Fidelity Investments portfolios. He's out to protect his clients' -- and his family's -- interests.</br></br>"As long as the stock market is doing well, people will keep investing," says Steve Henningsen, a financial adviser with the Wealth Conservancy in Boulder, Colo. "It's kind of weird this scandal hasn't chased people from funds."</br></br>Although many irate individuals and institutions have unloaded holdings of funds run by Putnam Investments, which has settled federal charges in the matter, and Strong Capital Management, which is under investigation but hasn't been charged with any wrongdoing, and other firms implicated in the scandal, money flowing into the fund industry as a whole has been surprisingly robust. From the start of September through the end of last month, stock mutual funds took in more than $63 billion, their highest three-month intake since early 2000 when stock prices peaked, according to flow-tracker AMG Data Services. This money has helped fuel the stock market's rise.