The Mutual Fund Industry Says They Are Doing a Terrific Job
November 12, 2007
A report released by the mutual fund industry's trade association (the ICI or Investment Company Institute) last week trumpets a decades' worth of changes made by fund companies designed to benefit shareholders - changes that include creating independent boards and audit committees tasked with protecting shareholder interests. But Chuck Jaffe (who has been writing about funds for much longer than one decade) says that fund companies still have plenty of work to do before earning a self-congratulatory pat on the back.
What you haven't seen in the last decade is those boards standing up regularly to management practices that are bad for investors. Plenty of funds have retained mediocre or lousy managers year after year, have pushed through fee increases or have failed to push management to close a fund to new cash after passing the ideal size for the strategy that is employed.
On the governance front, you have seen no steps by the big fund firms to set up multiple boards so that a director serves no more than, say, 25 funds. A director can only be so "independent" working for dozens of funds run by the same firm.
While boards have been marginally more active in dismissing subadvisers - outside hired guns brought in to run money - they appear no more interested in jettisoning in-house managers. They may be independent, but boards aren't firing insiders."
The Mutual Fund Industry Says They Are Doing a Terrific Job
A report released by the mutual fund industry's trade association (the ICI or Investment Company Institute) last week trumpets a decades' worth of changes made by fund companies designed to benefit shareholders - changes that include creating independent boards and audit committees tasked with protecting shareholder interests. But Chuck Jaffe (who has been writing about funds for much longer than one decade) says that fund companies still have plenty of work to do before earning a self-congratulatory pat on the back.
What you haven't seen in the last decade is those boards standing up regularly to management practices that are bad for investors. Plenty of funds have retained mediocre or lousy managers year after year, have pushed through fee increases or have failed to push management to close a fund to new cash after passing the ideal size for the strategy that is employed.
On the governance front, you have seen no steps by the big fund firms to set up multiple boards so that a director serves no more than, say, 25 funds. A director can only be so "independent" working for dozens of funds run by the same firm.
While boards have been marginally more active in dismissing subadvisers - outside hired guns brought in to run money - they appear no more interested in jettisoning in-house managers. They may be independent, but boards aren't firing insiders."
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