Mutual Funds Portfolio Structures, Analysis, Management, and Stewardship

by Haslem, John A.

• ISBN13: 9780470499092
• ISBN10: 0470499095
• Edition: 1st
• Format: Hardcover
• Copyright: 2009-11-02
• Publisher: Wiley
• More Book Details

Summary

An authoritative, must-read guide to making more informed decisions about mutual fundsProviding a balance of theory and application, this authoritative book will enable you to evaluate the various performance and risk attributes of mutual funds. It covers a broad range of topics, including understanding the advantages and disadvantages of mutual funds, evaluating stock/bond allocations within fund portfolios, assessing fund diversification risk, measuring fund returns and risk, and making fund buy/sell decisions.While informative chapters combine clear summaries of existing research with practical guidelines for mutual fund analysis, step-by-step decision checklists guide you through the selection of various mutual funds. Puts the risks and rewards of mutual fund investing in perspective Skillfully examines how to select and evaluate the best mutual funds Outlines mutual fund service advantages and disadvantages Discusses the long- and short-term effectiveness of mutual fundsCovering major theoretical and management issues in mutual fund analysis and portfolio management, this book is an authoritative guide.

Author Biography

John A. Haslem, PhD, is Professor Emeritus of Finance at the University of Maryland. He also served as the founding academic affairs dean and founding chair of the finance department. Haslem received the Panhellenic Association's "Outstanding Teacher Award" for his mutual funds course—the first in the curriculum of a school of business. His research has appeared in numerous leading finance journals, several books, and over 100 research articles with a primary focus on mutual fund analysis, regulation, and disclosure.

Table of Contents

Mutual Funds: Nature, Regulation, and Costs

The Nature of Mutual Funds by (Conrad Ciccotello)

Attributes of the Open-End Mutual Fund

The Board of Directors

Liquidity

All Equity Capital Structure

Portfolio Diversification

Professional Management

Investor Services

Mutual Funds and the Competitive Environment

Employer Sponsored Retirement Plans

After-Tax Accounts

References

About The Author

Mutual Fund Regulation and Issues by (Conrad Ciccotello)

Historical Perspective

Regulation of Open-End Funds

Recent Regulatory Issues in Open-End Funds

NAV Pricing and Trading Policies

Fund Pricing and the (Late) Trading Scandal

Current Regulatory Issues in Funds

Board Governance

Fees

Performance Reporting

References

About The Author

The Economics of Mutual Funds by (David M. Smith)

Size and structure of the mutual fund industry

Mutual fund creation and mortality

Scale economies: Expenses and fees

Scale Diseconomies: Fund Returns

Benefits of mutual fund investing to fund shareholders

Diversification

Professional portfolio management

Ready access to asset classes and market sectors

Drawbacks of mutual fund investing

Persistent high fees in some families

Underperformance relative to index funds

Tax inefficiency

Inadequate disclosure

Financial barriers to mutual fund investing and redemption

Mutual fund governance and agency problems

Fund family marketing and cross-subsidization

Conclusions

References

About The Author

Mutual Fund Fees and Expenses by (David M. Smith)

Loads

Expenses

Management Fees

Rule 12b-1 Fees

"Other" Expenses within the Expense Ratio

The Load Versus Expense Relation

Distribution Channel

ETFs and Closed-End Mutual Funds

Taxes

Fees and Expenses Internationally

Charges Not Included in the Expense Ratio

Partitioning Actively Managed Mutual Fund Fees Based on Alpha and Beta. Separation

Conclusions

References

About The Author

The Realities and Analogies of Investing

How Financial Markets Work by (Larry E. Swedroe)

How Markets Set Prices

Point Spreads and Random Errors

Examining the Evidence

An Efficient Market

How Stock Prices Are Set

Battle of the Discount Stores

The Financial Equivalent of the Point Spread

Individual Investors

Institutional Investors

The Moral of the Tale

Great Companies Do Not Make High-Return Investments

Small Companies versus Large Companies

Why Great Earnings Don't Translate Into Great Investment Returns

The Moral of the Tale

For Every Buyer There Must Be a Seller

The Moral of the Tale

References

About The Author

Active Versus Passive Investing by (Larry E. Swedroe)

Whose Interests Do They Have at Heart?

When Even the Best Aren't Likely to Win the Game

The Evidence

Lots of Counterproductive Activity

The Moral of the Tale

Why Is Persistent Outperformance So Hard to Find?

Conclusions

Investment Graffiti

The Death of Equities

The Great Depression of 1990

Dow 36,000

The Value of Stock Market Forecasts

Even if Your Crystal Ball Was Clear

Conclusions

Outfoxing the Box

The Moral of the Tale

Appendix: Investment Vehicle Recommendations

References

About The Author

Fund Types and Comparative Performance, Efficient Markets, Asset Allocation, and Morningstar Analysis

Efficient Markets and Mutual Fund Investing: The Advantages of Index Funds by (Burton Malkiel)

The Justification for Using Index Funds

The Evidence from U.S. Index Funds

The Evidence in Favor of Passive Management in World Financial Markets

Active vs. Passive Management in the Bond Market

Costs are Important Determinants of Net Returns

Mutual Funds vs. ETFs

Stock Market Returns vs. Investor Returns

Style or Factor Tilts in Mutual Funds

Conclusions

References

About The Author

Asset Allocation: Design and Care of Portfolios by (William J. Bernstein)

The Policy Allocation

Rebalancing

Strategic Asset Allocation

References

About The Author

The Morningstar Approach to Mutual Fund Analysis - Part I by (Don Phillips and Paul D. Kaplan)

The Cycle of Fear and Greed

Risk Management

Approaches to Portfolio Construction

Tools for Analyzing Funds

Morningstar Category

Mutual Fund Analysis Tools

Returns-Based Analysis

Total Returns

Sample Fund Comparison-Historical Performance

Risk and Risk-Adjusted Performance Measures

Modern Portfolio Theory Statistics

Beta

Alpha

R-Squared

Best-Fit Index

Sample Fund Comparison - Risk and Risk-Adjusted Performance Measures

The Morningstar Rating^TM for Funds

Risk- and Cost-Adjusted Performance

Overall and Period-Specific Ratings

How to Use the Star Rating

How Not to Use the Star Rating

Sample Fund Comparison - Star Rating

Conclusions

About The Authors

The Morningstar Approach to Mutual Fund Analysis - Part II by (Don Phillips and Paul D. Kaplan)

Holdings-Based Analysis

Asset Allocation

Stock Portfolio Analysis

Income, Costs, and Taxes

Yield

Loads

Expense Ratio

Tax Analysis

Qualitative Analysis

Stewardship Grade^SM.

Morningstar Fund Analyst Picks^SM.

Analyst Research Report

Conclusions

About The Authors

Building a Portfolio of Mutual Funds: A Morningstar Approach by (Don Phillips and Paul D. Kaplan)

Approaches to Portfolio Construction

Fund Selection

Domestic Large-Cap Stocks

Domestic Small/Mid-Cap Stocks

Foreign Stocks

Domestic Bonds

Portfolio 1 - A Less-Diversified Approach

Portfolio 2 - A Well-Balanced Approach

Analysis of the Portfolios

Asset Allocation

Style Diversification

Stock Sector

World Regions

Stock Stats

Fees & Expenses

Ongoing Maintenance

Conclusions

About The Authors

Performance of Actively Managed Versus Index Funds: The Vanguard Case by (Edward Tower)

Introduction

Methodology

In Defense of Geometric Alpha

The Tracking Indexes for the Old Funds

Prowess of Style Jumping and Equity Choice for the Old Funds

Prescient Style Jumping?

Alpha Fell

How have the young funds performed?

Did R² Predict Performance (Including Young Funds)?

Is the Past Prologue? Did Past Performance Predict Future Performance?

Did a Combination of R² and Past Alpha Predict Performance?

Did Morningstar Stars Predict?

Did Dan Wiener's Ratings Predict?

The Best Prediction Equation

Is Wiener Right That Vanguard's Managed Funds are Better Than its Index Funds?

Conclusions

References

About The Author

Classic and Enhanced Index Funds: Performance and Issues by (Edward Tower)

Vanguard

Dimensional Fund Advisors (DFA)

DFA's Feeder and Master Funds

DFA's Core Portfolios

DFA: Other Aspects

WisdomTree's Approach to Fundamental Indexation

Some Evaluations of Fundamental Indexation

Style Analysis to Compare Vanguard and DFA

Recent Performance of DFA Funds

The Tracking Portfolio with Long and Short Positions in Tracking Index

Domestic DFA Over the Entire CRSP Horizon

International DFA over the entire CRSP horizon

DFA's Core Portfolios

Additional DFA Costs

DFA Summary

How Do These Alphas Differ from Tower and Yang Alphas?

WisdomTree Versus Vanguard: Which is Better?

WisdomTree Summary

Conclusions

Note

References

About The Author

Mutual Funds Versus Exchange-Traded Funds by (Gary L. Gastineau)

A Brief History of ETFs

Portfolio Trading and Stock Index Future Contracts

Index Participation Shares (IPS)

Toronto Stock Exchange (TSE) Index Participations (TIPs)

Supershares

Standard & Poor's Depository Receipts (SPDRS)

World Equity Benchmark Shares (WEBS) - Renamed iShares MSCI Series - and Other Products Called ETFs

How Open End Portfolio ETFs Work

Shareholder Protection

Tax Efficiency

Improving ETFs

ETF and Mutual Fund Comparative Economics

Conclusions

References

About The Author

Mutual Funds at the Crossroads

The Challenge to Mutual Fund Stewardship by (John C. Bogle)

Challenge to Stewardship

Industry Structure and Scandals

Misaligned Interests

Market Timing

Conflict of Interest in Fund Fees

Asset Growth

Marketing Focus-We Make What Will Sell

Market Returns versus Fund and Investor Returns

Fund Stewardship

Fund Costs-Management Fees and Operating Expense Ratios

Portfolio Turnover

Equity Diversification

Marketing Orientation

Advertising

Shelf Space

Sales Loads

Shareholder Stability

Limitations on Fund Size

Experience and Stability of Portfolio Managers

Insider Ownership

Organization of Managers

Sources

References

About the Author

Identifying Mutual Fund Stewardship by (John A. Haslem)

Five Dimensions of Analysis

Return, Risk, and Risk/Return Performance

Diversification Risk

Management and Culture

Morningstar's Stewardship Grades

Bogle's Stewardship Quotient

Complements to Bogle's Approach

Stewardship Fund (or Not)

Conclusions

References

About The Author

Normative Transparency of Mutual Fund Disclosure by (John A. Haslem)

Disclosure as an Effective Regulatory Tool

Normative Transparency of Disclosure

Disclosure Template

Normative Transparency and the Expense Ratio

Current SEC Expense Ratio

New Total Expense Ratio

12b-1 Fees and Multiple Share Classes

Transaction Cost Issues

Conclusions: Normative Disclosure, the Total Expense Ratio, and Regulatory. Change

References

About The Author

A Design for the Mutual Funds of the Future by (John C. Bogle)

The Vanguard Vision

A Design for the Future

A Fair Shake for Fund Shareholders

Serving Investors for a Lifetime

Long-Term Investment Horizons for Fund Managers

Serving Long-Term Investors

Fund Investors in the Driver's Seat

Conclusions

Sources

References

About the Author

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