Mutual fund investors withdrew more than a net $40 billion last year from fund companies caught up in the market timing scandal, the fund industry’s largest trade group said in a study.

Just as other fund companies saw their sales improve sharply last year, firms named in the scandal experienced net redemptions from their stock and bond funds averaging $10.7 billion in each of the last four months of 2003, according to the Investment Company Institute. Those companies had reported monthly net withdrawals totaling an average of $1 billion for the first eight months of the year, before the first report of the regulatory investigations in early September.

Firms not cited by regulators in various allegations of share trading abuses saw their monthly flow of new money rise to an average of $28.9 billion during each of the last four months of the year, up from $18.9 billion a month between January and August.

The ICI’s report gave only totals for the withdrawals from stock and bond funds without listing the specific firms or the amounts of money investors took out of their accounts. Some fund firms have had much larger withdrawals because institutional customers have taken money out of separate accounts also managed by the companies, but these figures weren’t included in the mutual fund totals prepared by the ICI.

Overall, stock and bond funds attracted $216 billion in new investor money in 2003, nearly an 80% increase from 2002. But $258 billion also was withdrawn from money market funds, which more than offset the strong inflows into long-term stock and bond funds.

The effect of the market timing scandal also showed up in redemption rates, measured as a percentage of total fund assets. Redemptions from funds, including those resulting from exchanges between funds within the same fund family, fell to 31% in 2003 from 41% in 2002, the ICI said.