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Mutual Fund Management
First Research, Jan 2010, Pages: 10
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Executive Summary
Brief Excerpt from Industry Overview Chapter:
The US mutual fund management industry includes about 1,000 companies with combined annual revenue of $100 billion. Major companies include Capital Group (American Funds), Fidelity Investments (FMR), T Rowe Price, and Vanguard. The industry is highly concentrated.
COMPETITIVE LANDSCAPE
Demand is affected by the growth of retirement capital and returns on alternative investments. The profitability of individual companies depends on investment expertise and effective marketing. Large companies have economies of scale in operations and marketing; small companies can compete effectively by producing higher investment returns. The industry is highly automated.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major management services include the initial formation of a mutual fund, sales and redemption of shares, investment advisory services, and day-to-day management.
Each mutual fund is a separate open-end investment company, with shareholders (the investors) and a board of directors, but no operating staff. All services are provided by outside contractors. The sponsor of a fund usually serves as investment adviser and manager of the fund, and receives an annual fee typically calculated as a percentage of fund's assets. Large mutual fund operators may sponsor and manage dozens of funds, collecting a management fee from each. In addition to paying a management fee, mutual funds pay the underwriters who sell their shares, the custodian of their portfolio, the transfer agent, and an independent auditor. The expense ratio for a fund is the sum of all annual expenses divided by the average ...
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