The novel providedes the definitive answer:
Fredo suffered a nervous breakdown when the Don was shot. When Sonny, Tom and Michael were discussing what to do next about Sollozzo and Tattaglia, they said Fredo was "in shock," and concluded, "keep Fredo out of this, keep him out of everything," (or some such--I don't have the novel in front of me). At some time after the shooting (probably before the Don returned home from the hospital), Fredo was sent to Vegas to "learn the hotel business" and was really out of it.