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FYI: Securities and Exchange Commission Chairwoman Mary Jo White says the Commission is taking a magnifying glass on the regulation of the asset management industry and mutual funds in particular, pointing out that in 2013, 57 million American households, or 46% of those households, are invested in one of the 10,000 U.S. mutual funds that hold more than $63 trillion of assets under management. Regards, Ted http://www.thinkadvisor.com/2014/12/12/secs-white-vows-to-get-tougher-on-mutual-funds?t=portfolio-construction&page_all=1
There are lies, darned lines, and ... Some of these figures are wildly off if read without the footnotes.
Ms. White's published speech footnote 1 says that the $63 trillion figure came from an analysis that tended toward double counting. That's generous, as the ICI figure (from 2014 Investment Company Fact Book) is less than half: $30.0 trillion invested worldwide, and "just" $17.1 trillion in the US.
Likewise, footnote 2 says "certain entities" were double counted in coming up with almost 10,000 funds. (The ThinkAdvisor reporting omitted "almost".) The number is actually closer to 7500. M*'s database (using its premium screener and "distinct portfolio only" filter) reports 7,353 distinct mutual funds (and 1672 ETFs), while the ICI reports 7,707 US funds, and 76,200 worldwide.
Ms. White talks about the need for "a more comprehensive approach ... to address the risks associated with ... the use of derivatives [by mutual funds]." Meanwhile, Congress is debating a relaxed approach to the use of derivatives by banks with FDIC-insured money.
When funds use derivatives (or any other vehicle) it's your money - you win or you lose. I'm not one to play fast and loose with my investments, but at least it's the same person who stands to win or lose by these risks. (So clear disclosure might be sufficient - investors can dial up or dial down their risk.) With the banks, it's heads they (their executives and shareholders) win, tails you (the taxpayer/FDIC) lose.
Comments
Ms. White's published speech footnote 1 says that the $63 trillion figure came from an analysis that tended toward double counting. That's generous, as the ICI figure (from 2014 Investment Company Fact Book) is less than half: $30.0 trillion invested worldwide, and "just" $17.1 trillion in the US.
Likewise, footnote 2 says "certain entities" were double counted in coming up with almost 10,000 funds. (The ThinkAdvisor reporting omitted "almost".) The number is actually closer to 7500. M*'s database (using its premium screener and "distinct portfolio only" filter) reports 7,353 distinct mutual funds (and 1672 ETFs), while the ICI reports 7,707 US funds, and 76,200 worldwide.
Ms. White talks about the need for "a more comprehensive approach ... to address the risks associated with ... the use of derivatives [by mutual funds]." Meanwhile, Congress is debating a relaxed approach to the use of derivatives by banks with FDIC-insured money.
When funds use derivatives (or any other vehicle) it's your money - you win or you lose. I'm not one to play fast and loose with my investments, but at least it's the same person who stands to win or lose by these risks. (So clear disclosure might be sufficient - investors can dial up or dial down their risk.) With the banks, it's heads they (their executives and shareholders) win, tails you (the taxpayer/FDIC) lose.