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Mutual fund investors reward short run performance with large inflows. Fund managers facing strong performance-related flows are shown to focus more on short horizon investments. Further tests of causality suggest that fund manager’s short investment horizons are caused by their investors ’ short horizons, but not the other way around. Fund managers subject to severe short-term tend to invest in larger stocks and growth stocks. Controlling for size, book-to-market and momentum effects, the stocks invested by higher turnover fund managers tend to generate lower return going forward, consistent with a hypothesis that these fund managers are inflating the demand for shorter-horizon investment opportunities and neglecting longer-horizon investment opportunities. The portfolio formed based on shorting the high turnover stocks and longing the lowest turnover stocks generates substantial abnormal return during 1992 to 2003. Keywords: Short-termism, career concern, mutual fund, flow performance relation, arbitrage strategy. “In our business, there's tremendous pressure for performance.... That potentially drives dysfunctional behavior and way too short-term behavior.”- Duncan Richardson, portfolio manager and chief of research staff at Eaton Vanc