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The Fund Industry: How Your Money is Managed, 2nd Edition

Book Description

A guide to how your money is managed, with foreword by Nobel laureate Robert Shiller

The Fund Industry offers a comprehensive look at mutual funds and the investment management industry, for fund investors, those working in the fund industry, service providers to the industry and students of financial institutions or capital markets. Industry experts Robert Pozen and Theresa Hamacher take readers on a tour of the business of asset management. Readers will learn how to research a fund and assess whether it's right for them; then they'll go behind the scenes to see how funds are invested, sold and regulated. This updated edition expands coverage of the segments of the industry where growth is hottest, including hedge funds, liquid alternatives, ETFs and target date funds—and adds an introduction to derivatives.

Mutual funds are a key component of financial planning for 96 million Americans. Nearly a quarter of U.S. household savings are invested in funds, which give individual investors affordable access to professional management. This book provides a detailed look at how firms in the industry:

  • Invest those savings in stocks and bonds

  • Evaluate the risks and returns of funds

  • Distribute funds directly to consumers or through financial advisors or retirement plans

  • Handle the complex operational and regulatory requirements of mutual funds

  • Vote proxies at the annual meetings of public companies

  • Expand their operations across borders

  • Along the way, the authors describe the latest trends and discuss the biggest controversies—all in straightforward and engaging prose. The Fund Industry is the essential guide to navigating the mutual fund industry.

    Table of Contents

    1. Cover Page
    2. Title Page
    3. Copyright
    4. Contents
    5. Foreword
    6. Preface to the Second Edition
    7. Acknowledgments
    8. SECTION One: An Investor's Guide to Mutual Funds
      1. CHAPTER 1: Investing through Mutual Funds
        1. ADVANTAGES AND DISADVANTAGES OF MUTUAL FUNDS
        2. HISTORY AND GROWTH
        3. REGULATORS AND INDUSTRY ASSOCIATIONS
        4. CHAPTER SUMMARY
        5. NOTES
      2. CHAPTER 2: How Mutual Funds Work
        1. BUYING AND SELLING FUND SHARES
        2. THE PASS-THROUGH TAX STATUS OF MUTUAL FUNDS
        3. A VIRTUAL CORPORATION
        4. ETHICAL STANDARDS
        5. ALTERNATIVES TO MUTUAL FUNDS
        6. CHAPTER SUMMARY
        7. NOTES
      3. CHAPTER 3: Researching Funds: The User Guides
        1. MUTUAL FUNDS AND DISCLOSURE
        2. THE SUMMARY PROSPECTUS
        3. BEYOND THE SUMMARY PROSPECTUS
        4. USING THE USER GUIDES
        5. CHAPTER SUMMARY
        6. NOTES
      4. CHAPTER 4: Comparing Mutual Funds
        1. DELINEATING YOUR OWN INVESTMENT OBJECTIVES
        2. EVALUATING PERFORMANCE
        3. THE TAXONOMY OF MUTUAL FUNDS
        4. CHAPTER SUMMARY
        5. NOTES
      5. CHAPTER 5: The Cost of Fund Ownership
        1. THE FOCUS ON FUND EXPENSES
        2. DISTRIBUTION EXPENSES
        3. OPERATING EXPENSES
        4. THE MANAGEMENT FEE
        5. THE ACTIVE VERSUS PASSIVE DEBATE
        6. CHAPTER SUMMARY
        7. NOTES
    9. SECTION Two: Mutual Fund Portfolio Management
      1. CHAPTER 6: Portfolio Management of Stock Funds
        1. STOCK RESEARCH
        2. PUTTING IT ALL TOGETHER: MANAGING A STOCK FUND
        3. CHAPTER SUMMARY
        4. NOTES
      2. CHAPTER 7: Portfolio Management of Bond Funds
        1. BOND FUND HOLDINGS
        2. PUTTING IT ALL TOGETHER: MANAGING A BOND FUND
        3. CHAPTER SUMMARY
        4. NOTES
      3. APPENDIX to Chapter 7: Funds and Derivatives
        1. USES OF DERIVATIVES IN FUNDS
        2. REGULATION OF DERIVATIVES IN FUNDS
        3. NOTES
      4. CHAPTER 8: Portfolio Management of Money Market Funds
        1. MONEY MARKET FUNDS AND THE FINANCIAL SYSTEM
        2. RULE 2A-7
        3. MONEY MARKET FUND HOLDINGS
        4. PUTTING IT ALL TOGETHER: MANAGING A MONEY MARKET FUND
        5. CHAPTER SUMMARY
        6. NOTES
      5. CHAPTER 9: Implementing Portfolio Decisions: Trading
        1. THE IMPORTANCE OF TRADING
        2. THE U.S. STOCK MARKETS
        3. THE ROLE OF THE MUTUAL FUND TRADER
        4. TRADING IN BOND FUNDS
        5. CHAPTER SUMMARY
        6. NOTES
      6. CHAPTER 10: Mutual Funds as Stockholders
        1. MUTUAL FUNDS AND THE PROXY VOTING PROCESS
        2. PROXY VOTING BY MUTUAL FUNDS
        3. ACTIVISM AND MUTUAL FUNDS
        4. CURRENT ISSUES IN PROXY VOTING
        5. PROXY VOTING OUTSIDE THE UNITED STATES
        6. CHAPTER SUMMARY
        7. NOTES
    10. SECTION Three: Sales and Operations
      1. CHAPTER 11: Retail Distribution
        1. WHAT SELLS MUTUAL FUNDS?
        2. DISTRIBUTION CHANNELS
        3. FUND PLATFORMS
        4. DISTRIBUTION STRATEGY
        5. CHAPTER SUMMARY
        6. NOTES
      2. CHAPTER 12: Retirement Saving through 401(k) Plans
        1. THE BENEFITS OF TAX-DEFERRED SAVING
        2. HISTORY AND GROWTH OF 401(K) PLANS
        3. CONTRIBUTIONS TO 401(K) PLANS
        4. INVESTMENT OPTIONS IN 401(K) PLANS
        5. TARGET DATE FUNDS
        6. PLAN ADMINISTRATION
        7. CHAPTER SUMMARY
        8. NOTES
      3. CHAPTER 13: Other Retirement Planning Options
        1. INDIVIDUAL RETIREMENT ACCOUNTS
        2. VARIABLE ANNUITIES
        3. THE FUTURE OF RETIREMENT INCOME IN THE UNITED STATES
        4. CHAPTER SUMMARY
        5. NOTES
      4. CHAPTER 14: Fund Operations
        1. THE TRANSFER AGENT
        2. FUND ACCOUNTING
        3. INVESTMENT OPERATIONS
        4. CHAPTER SUMMARY
        5. NOTES
    11. SECTION Four: Beyond Traditional Funds
      1. CHAPTER 15: Exchange-Traded Funds
        1. A BRIEF HISTORY
        2. ADVANTAGES AND DISADVANTAGES
        3. LEGAL STRUCTURE
        4. OPERATIONS
        5. PORTFOLIO HOLDINGS
        6. THE FUTURE OF ETFs
        7. CHAPTER SUMMARY
        8. NOTES
      2. CHAPTER 16: Hedge Funds
        1. TRADITIONAL HEDGE FUNDS
        2. TRADITIONAL HEDGE FUND INVESTORS
        3. THE NEW HEDGE FUNDS: LIQUID ALTERNATIVES
        4. CHAPTER SUMMARY
        5. NOTES
    12. SECTION Five: The Internationalization of Mutual Funds
      1. CHAPTER 17: Cross-Border Investing
        1. THE GROWTH IN CROSS-BORDER INVESTING
        2. ADVANTAGES AND RISKS OF INVESTING OVERSEAS
        3. OPERATIONAL CHALLENGES OF INVESTING OVERSEAS
        4. PUTTING IT ALL TOGETHER: MANAGING A GLOBAL OR INTERNATIONAL FUND
        5. CHAPTER SUMMARY
        6. NOTES
      2. CHAPTER 18: Cross-Border Asset Gathering
        1. THE GLOBAL MARKET FOR INVESTMENT FUNDS
        2. MODELS FOR A GLOBAL FUND BUSINESS
        3. THE UCITS MODEL
        4. CHAPTER SUMMARY
        5. NOTES
      3. APPENDIX to Chapter 18: Gathering Fund Assets through Retirement Plans
        1. CHILE'S RETIREMENT SYSTEM
        2. SINGAPORE'S RETIREMENT SYSTEM
        3. NOTES
    13. About the Companion Website
    14. About the Authors
      1. ROBERT POZEN
      2. THERESA HAMACHER, CFA
    15. Index