Assets Crest Record $10 Trillion Mark

Clearly, the recent strength of the stock market has been a driving factor in boosting fund assets. The average stock fund tracked by TheStreet.com Ratings returned an annualized 12.71% over the three years ended Oct. 31.

Todd Trubey, mutual fund analyst at Morningstar, notes that only $566 billion of the mutual fund industry's $4 trillion in growth since 2002 has come from new money.

"A lot of [the growth] is appreciation," he says. "The other factor is when there's a stock market rally, people tend to invest in stocks and mutual funds."

Mutual funds are also benefiting from the fact that more companies are forcing employees to put aside money for their own retirement. Mutual funds hold half of the $2.4 trillion in assets invested in 401(k) plans, according to the ICI.

While investors have pulled money out of individual firms implicated in the trading scandal, ICI spokesman Giltenan says most of it was probably shifted to other fund families. "People who betrayed investors' trust paid the ultimate price, but there was not a crisis of confidence."

Morningstar's Trubey adds that the trading scandal has resulted in some positive change. "First of all, you started seeing [more] redemption fees," he says, noting that this discourages the rapid-fire trading that can harm long-term shareholders.

"Second, compliance was beefed up, especially at the firms that participated [in the abuses]. We've also gotten some movement on the regulatory front. But one of the key things is that the [scandal] got investors to think about the fund firms they could really trust."

Some people are skeptical about the mutual fund industry's staying power, however, given the rise of ETFs.

Kevin Baker, senior financial analyst at TheStreet.com Ratings, notes that all of the ETFs currently offered in the U.S. are passive investment vehicles that track indices. But he believes that an actively managed ETF product would have even broader appeal.

"Several firms have applied to create actively managed ETFs," he says. "Once the cork is popped, there will be no chance to get the champagne back in the bottle. I predict it will be all downhill for mutual fund assets, since ETFs are a superior investment vehicle."