Capital Market Players: Retirement and Other Fund Managers
Category Overview
Fund Managers
Most Americans hire professionals to manage their portfolios
Professional portfolio managers control a major part of the money that flows to the U.S. capital market.
Fund managers manage other people's money for a fee.
Generally, the larger the portfolio, the higher the fee, although management costs are not closely related to the size of a portfolio.
The way fund managers' performance is judged depends on the type of portfolio they manage:
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Defined-benefit pension and retirement funds have fixed monetary goals set fifteen to twenty years hence.
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Open-end mutual funds have goals measured as 'total return' dependent mainly on short-term price movements. The manager's responsibility to the investor is often diluted by multiple levels of fiduciaries.
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Bank personal trusts and estates manage money to meet needs of specific individuals.
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Exchange-traded funds are usually designed to follow the composition of a specific security index.
Fund managers invest other people's money for a fee
The SEC does not require open-end fund administrators to provide information to long-term investors that might help them judge the intrinsic value of fund portfolios, nor does the manager bear responsibility as to the appropriateness of the investor's initial asset-allocation decision.
Unsophisticated mutual fund investors with unquestioning acceptance of the Common Stock Legend have been a major force behind the long bull market in stocks since the early 1980s.
