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The Fund Industry
Book

The Fund Industry

How Your Money Is Managed

Robert Pozen and Theresa Hamacher
Wiley, 2011
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Editorial Rating

8

Qualities

  • Applicable

Recommendation

While mutual funds are the most popular investment vehicles in the United States, few investors know how they work, what they cost and how to choose among them. If you’re among the billions of people investing through mutual funds, you should learn more about how fund companies manage your money, how they make their large profits and what expenses the fees they charge cover, all of which affect your bottom line. Fund management experts Robert Pozen and Theresa Hamacher work on fixing this educational gap by presenting a comprehensive textbook on the fund industry. The authors excel in providing details of daily fund operations, portfolio investing, new investment products, financing, fund sales and global investing. But they come up against a problem: Some of their content is too esoteric for the average investor and is better suited to fund industry professionals. Nonetheless, getAbstract highly recommends this expert guide to financial executives seeking an operating handbook to the fund industry and to seasoned investors looking to get a better grip on this lucrative industry.

Summary

Managing Trillions

In 2009, about 87 million Americans owned mutual funds, the most popular vehicles for investing and managing cash. Mutual funds have surpassed banks as the nation’s preferred savings medium. Yet while Americans invest more than $11 trillion in about 7,600 mutual funds, few know how the industry operates, how it manages investor money and how it sells its funds.

Mutual funds have become prevalent for many reasons: They offer diversification, liquidity, “professional management,” “access to investment opportunities,” regulatory protections and transparency. Funds present their investment performance results in a standardized fashion, which allows investors to make easy comparisons among them.

But these advantages have their price: In 2009, management services, which include administrative costs and marketing expenses, cost investors an annual average of 0.86% of their fund assets. Mutual fund fees, however, don’t cover the trading costs funds incur when they buy and sell securities, nor the commissions paid to some investment advisers. Fund fees vary by the distribution channels fund companies use to sell mutual funds to investors and by the...

About the Authors

Robert Pozen is chairman emeritus of MFS Investment Management and a senior lecturer at Harvard Business School. Theresa Hamacher is president of the National Investment Company Service Association (NICSA).

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