Worldwide mutual funds accounted for $23.7 trillion in assets as of Sept. 30, according to the Investment Company Institute's latest data, including $2.3 trillion in mutual fund assets in 401(k) and other U.S. defined contribution plans.
Yet how much do pension plan sponsors and other institutional investors know about how mutual funds really operate?
In a new book, “The Fund Industry: How Your Money Is Managed,” Robert Pozen and Theresa Hamacher provide a valuable overview of the operations of the mutual funds industry. Mr. Pozen is chairman emeritus of MFS Investment Management, and Ms. Hamacher is president of the National Investment Company Service Association.
The book, published by John Wiley & Sons Co., examines how mutual funds are structured and governed as well as how they are managed, how they are sold and what factors drive profitability.
It describes the role of retirement plans' use of mutual funds, the most popular investment option in 401(k) plans, accounting for 53% of DC assets as of Sept. 30, according to the ICI. That section includes mutual funds as administrators and record keepers of DC plans, as well as mutual fund expenses. Topics also include the global market for mutual funds and competition from exchange-traded funds and even hedge funds, and the role mutual funds play as institutional investors in corporate governance activity, from proxy voting to shareholder activism.
“Mutual funds play an integral role in daily life,” the authors write, noting, “It's a highly complex industry” as they seek to help investors understand their operations and underpinnings.