Today's Mutual Fund Industry
  1. Overview Of The Mutual Fund Industry
  2. History Of The Mutual Fund
  3. How A Mutual Fund Works
  4. Today's Mutual Fund Industry
  5. Fund Investment Qualities
  6. Fund Investment Quality Scorecard (FIQS)

Today's Mutual Fund Industry

By Richard Loth (Contact | Biography)

According to the 2005 Investment Company Institute Fact Book, nearly 600 financial intermediaries in the U.S. and around the world compete in the U.S. mutual fund market. It is estimated that, as of year-end 2004, the top 25 of these firms held 74% of this market's $8.2 trillion total assets under management.

The 8,000 plus publicly traded mutual funds in the U. S. break down by type as follows:

It is a huge understatement to say that for the investing public, this number of fund choices is absolutely overwhelming.

It is important for fund investors to appreciate the importance of investing in funds that are sponsored by financial intermediaries in good standing. That is to say, that they are not saddled with regulatory problems resulting from questionable management practices and governance problems. The serious mutual fund scandals of 2002 and 2003 are, hopefully, behind us. However, it is prudent for fund investors to maintain a watchful eye in this area.

Investors should start by screening for those fund sponsors that are scandal-free and that do a good job of aligning their interests with those of their fund shareholders. Professionals in the mutual fund industry refer to this as good stewardship. The most accessible source of stewardship grades is a Morningstar Fund Report. Morningstar's grading of fund sponsor stewardship has become an important part of its evaluative reporting on the mutual fund industry. (For more insight, see Morningstar's Stewardship Grade Service A Welcome Addition.)

It is natural that opinions will differ on fund-sponsor quality. However, it is worthwhile to note that there appears to be a connection between high quality fiduciary management at the fund sponsor level and high quality investment performance at the individual fund level. (For related reading, see Picking The Right Mutual Fund.)

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Fund Investment Qualities

  1. Overview Of The Mutual Fund Industry
  2. History Of The Mutual Fund
  3. How A Mutual Fund Works
  4. Today's Mutual Fund Industry
  5. Fund Investment Qualities
  6. Fund Investment Quality Scorecard (FIQS)
  1. Benchmark

    A standard against which the performance of a security, mutual ...
  2. Qualitative Analysis

    Securities analysis that uses subjective judgment based on nonquantifiable ...
  3. Alpha

    Alpha is used in finance to represent two things: 1. a measure ...
  4. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and ...
  5. Liquidity

    The degree to which an asset or security can be quickly bought ...
  6. Equity

    Equity is the value of an asset less the value of all liabilities ...
  1. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
  2. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  3. Does OptionsHouse have mutual funds?

    OptionsHouse has access to some mutual funds, but it depends on the fund in which the investor is looking to buy shares. ... Read Full Answer >>
  4. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  5. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>
  6. When are mutual fund orders executed?

    Whether buying or selling shares of a fund, mutual fund trades are executed once per day after the market close at 4 p.m. ... Read Full Answer >>

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