Mutualfundreform.com

At one time, Europe was considered the trendsetter in fashion, design and political thought.  Now, a new study by Greenwich Research shows that Europe is leading the way in fee reductions and introducing new investment products centered around ETFs and specialized funds. The reason for the re-positioning is due to Europe’s new economic realities. The 2011 European Intermediary Distribution study found that in order to remain competitive and provide a…

The debate over the benefits of active investment management versus passive investing remains a favorite topic of investors.   Whenever new data emerges to buttress the long-established argument that index funds, which use passive investing, outperform on all measures compared to active-funds, the strategy gains more attention. 

Average Annual Total Returns (as of 10-31-2011) YTD Returns at NAV     1 Year 3 Years 5 Years 10 Years 15 Years     Standard & Poor’s 500 Composite Index N/A 8.07% 11.41% 0.25% 3.69% 5.77%     DJIA N/A 10.34% 11.80% 2.53% 5.39% 7.04%     NASDAQ N/A 7.06% 15.97% 2.55% 4.73% 5.39%     MSCI All Country World Index ex- USA N/A −4.25% 13.43% 0.08% 8.05% 5.39%  …

When it comes to taking sides publicly on major social issues, corporations have not led the way.  Stating a position is not what corporations do.  Getting the needed corporate consensus is time-consuming, requires direct participation by top executives and the board of directors, and uses political capital to arrive at a consensus. Then, the risk exists that the deciision will offend some constituents. So it is not surprise that no financial…

First it was individual stock selection, than manager expertise, then investment styles (e.g., large-cap, small cap value), then asset allocation.  Now, a new study shows that the industry fashion is alternatives, which is a general term for both alternative strategies (long-short, leveraged, or absolute return) and the foray into different sectors (commodities, real estate) or strategies (managed futures, hedge funds, convertible arb, take-overs.) The good news is that alternatives in…

Most of the discussions about the need for greater transparency in financial transactions has centered on the need to adopt greater fiduciary responsibilities. But there is also another reason: economic. Mutual funds benefit financially from the lack of transparency.  When fund companies make it difficult for investors to choose between the 8,029 mutual funds and 21,631 different share classes*, the fund companies stand to profit. That’s why fund companies intentionally…

Note: This article was originally published in July 2010.  Investors are still waiting for a decision. After decades of wrangling, false starts, and back room intrigues, it looks like the SEC is finally addressing the long-over due, critical issue of mutual fund fees. Today, these fees charged to fund shareholders amount to $12 billion, according to the SEC. Yet, despite this huge amount, shareholders have no idea what they are…

While the 401(k) movement has been going strong for the past 30-plus years, it now looks like the investment managers who were administering the funds and providing the advice have been engaged in a conflict of interest with their company plan counterparts. At least that is what the U.S. Department of Labor’s Government Accountability Office now contends. In a recent study, “Improved Regulation Could Better Protect Participants from Conflicts of…

One of the biggest problems facing the mutual fund industry’s relationships with its millions of shareholders is justifying fund wholesalers’ salaries. This is a contentious and sticky issue for a few reasons: First, mutual fund wholesalers really don’t add anything which directly benefits shareholders.  In theory, they should be reducing overall fund expense ratios by increasing the asset base of mutual funds. This would then lower the overall expense ratio…

Most mutual fund shareholders don’t know what they are being charged for their mutual funds and more importantly, why these expenses are critically important. In normal economic times, when the the economy is healthy, fund fees erode your investment returns, but they are offset by the investment gains. The fees are still significant, and in many cases too expensive compared to what the shareholder gets in return, but the emotional…