While mutual fund managers chased the hottest shares, individual investors pursued the hottest funds. “The American public was writing endless checks to these funds—and the funds then had to invest the money,” recalled George Kelly, an analyst at Morgan Stanley.14 No matter how high the market climbed, most mutual fund managers were expected to stay fully invested. The only way to dispose of the bags of money piling up at their doors was to pour it into the biggest, most liquid, and most popular names. The buying pressure would push share prices to the moon.
