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| News & Scoreboards |
Fund Disfavor
02/02/2004
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Affluent Americans began pulling their money out of mutual funds in earnest by mid-2003, even before the late-trading scandals broke and caused many mutual fund investors to abandon firms such as Putnam, Janus and Strong, which face serious allegations. Most swapped their underperforming mutual funds for investments in real estate and hedge funds. "These investors, whom we can assume are some of the most well-informed in the market," says Catherine S. McBreen, managing director of Spectrem Group, "have been turning to alternative investments such as hedge funds and real estate in search of higher returns."
 According to a survey conducted in the summer of 2003 by the Spectrem Group, a Chicago-based consulting firm, mutual funds now make up only 6 percent of our investable assets, compared with 11 percent two years ago. The report, Asset Allocation and Product Ownership, states that average investments in mutual funds by the survey’s respondents tumbled by 31 percent, to an average of $1.1 million during the period. (Click image to view chart)
Hedge funds took up some of the slack. These were owned by only 6 percent of the affluent households surveyed in 2001, but that figure jumped to 15 percent in the 2003 survey. Seventy-four percent of the respondents had investments in real estate. The hedge fund scandals may also spur a return to direct investing: more than two-thirds of the respondents told Spectrem that they plan to invest directly in equities in the coming year.
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