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Home » Viewpoints MarketWatch Misunderstands Important Role of Mutual Fund DirectorsBy Amy LancellottaMay 15, 2012 Shareholders deserve better than a recent MarketWatch column’s clear misunderstanding of a mutual fund director’s work. To correct just a few points: Directors’ independence: Mutual fund boards are robustly independent. Fund independent directors, as fiduciaries, are required to act in the best interest of fund shareholders. As the Supreme Court observed, independent directors have “the primary responsibility” for looking after the interests of the fund’s shareholders and serve as “independent watchdogs” who “furnish an independent check” upon the management of the fund. The Investment Company Act of 1940—the primary federal law governing mutual funds and directors—sets forth specific and stringent requirements for a director to be deemed “independent” and requires that at least 40 percent of the directors on a board be independent. In practice, independent directors hold an overwhelming majority (75 percent) of board seats in nearly 90 percent of fund complexes. Directors’ responsibilities: In contrast to the column’s assertion, fund boards do push firms to do right by customers. One of the board’s most important statutory responsibilities is to annually evaluate and approve the fund’s contract with the adviser. Directors throughout the year assess the quality of the adviser’s services, most notably the fund’s performance, and can push for corrective action, including urging the adviser to hire a new portfolio manager or subadviser for the fund, to increase its investment research capability, or to close or merge the fund. Directors overseeing multiple funds: The unique structure of mutual funds and fund complexes make board oversight of multiple funds within a fund complex an efficient and effective approach to governance. This is because all of the funds within the same complex usually receive necessary services (including, for example, portfolio management and shareholder recordkeeping) from the same entities, are served by common personnel, and are organized around common operating features. Directors’ pay: Fund directors are paid for the work they do on behalf of shareholders, and their fundamental responsibilities are constant, regardless of market fluctuations and the performance of different asset classes. Placing control over compensation in the hands of the independent directors and not with fund management helps to ensure the independence and effectiveness of the board. Moreover, directors’ compensation is transparent: every mutual fund is required to disclose directors’ compensation in its statement of additional information. For more information about directors and the work they do on behalf of shareholders, please visit the IDC website. Amy Lancellotta is Managing Director of the Independent Directors Council. TOPICS: Fund Governance A Regulatory Update Featuring Mary SchapiroBy Rachel McTagueMay 11, 2012 Restoring the reputation of the Securities and Exchange Commission (SEC), market volatility and market structure, financial literacy, and the SEC’s efforts to make further structural changes to money market funds took center stage as SEC Chairman Mary Schapiro fielded questions from Mellody Hobson, Chairman of the ICI General Membership Meeting and President of Ariel Investments, on May 11. TOPICS: Events Managing Chaos!By Andrew GilliesMay 11, 2012 Actors dying on set, getting held up at a Chinese border crossings at cost of $500,000 per day, having filming disrupted by floods, sandstorms, snowstorms, and diarrhea outbreaks: George Lucas has seen it all. “In the movie business,” he told the closing session of ICI’s 54th General Membership Meeting, “every day, something is going to go wrong.” Lucas, founder of Lucasfilm, Ltd., was interviewed by Ariel Investments President Mellody Hobson, ICI Governor and Chairman of ICI’s GMM Planning Committee. TOPICS: Events Investment Management in a Rapidly Changing WorldBy Jennifer SmithMay 11, 2012 Industry leaders exchanged views on developments in China, the ongoing European debt crisis, and how the United States is doing compared to other major economies in a lively and insightful session at ICI’s General Membership Meeting. TOPICS: Events Operations and Technology Leadership RoundtableBy Candice GullettMay 10, 2012 At the Leadership Roundtable for the Operations and Technology Conference, leaders from the industry answered questions posed by the moderator, Barry Benjamin—U.S. and Global Asset Management Leader for PricewaterhouseCoopers, LLP—as well as questions from the audience. The major issues the panel discussed were people, regulatory change, technology, and social media. TOPICS: Events Fund Distribution: Evolving Challenges and ComplexitiesBy Candice GulletMay 10, 2012 “Fund Distribution: Evolving Challenges and Complexities,” a joint session for the General Membership Meeting and the Operations and Technology Conference, explored the implications for the fund industry of the continuing transition to fee-based advisory programs, trends in product development, and the use of social media. Bob Cunha, Principal at Market Metrics, moderated the discussion, which focused significantly on the increasing use of the Rep as PM (representative as portfolio manager) platform. One of the main arguments against these models is portfolio turnover and the relatively large volume of trading. TOPICS: Events Managing Global Funds in Challenging TimesBy Andrew GilliesMay 10, 2012 Immense opportunities lie ahead for global fund managers, agreed panelists at a session at ICI’s 54th General Membership Meeting. “We are only seeing the tip of the iceberg,” said Vijay C. Advani, Executive Vice President, Global Advisory Services at Franklin Resources, Inc. Advani, whose firm draws half of its flows from outside the United States, cited a recent survey predicting the population of individuals defined as middle class will increase from 1.5 billion currently to 5 billion by 2030. TOPICS: Events The Media, the Medium, and the MessageBy Miriam BridgesMay 10, 2012 In a candid conversation exploring how the mutual fund industry must engage “old” and “new” media to communicate their messages, panelists Arianna Huffington, President and Editor in Chief of the Huffington Post Media Group, F. William McNabb III, Chairman and CEO of Vanguard, and Gillian Tett, U.S. Managing Editor of the Financial Times shared their perspectives on today’s media and messaging. TOPICS: Events GMM Leadership Panel: Lasting Values for Challenging TimesBy Mike McNameeMay 10, 2012 Helping investors cope with economic risks in Europe and the United States, select products that best meet their financial goals, and manage expectations in a turbulent environment with rising interest rates are among the top challenges for fund advisers, a panel of industry leaders told ICI’s General Membership Meeting. TOPICS: Events Serving Retirement Savers in a Changing Regulatory EnvironmentBy Mike McNameeMay 10, 2012 The 401(k) and other defined contribution plans are evolving toward new structures and products to help participants solve their savings and investment challenges, and new regulations now under consideration need to be crafted to support that trend, a panel of retirement plan experts told ICI’s General Membership Meeting. TOPICS: Events Luncheon with Keynote Speaker Howard SchultzBy Andrew GilliesMay 10, 2012 “What is the role and responsibility of business leaders, corporations, CEOs, when you know that the path that the country is going down is not the right path, and people are being left behind?” That was the question posed to ICI’s 54th General Membership Meeting by Starbucks Chairman, President, and CEO Howard Schultz during his lunchtime keynote address. TOPICS: Events At GMM Policy Forum, Secretary of Education Duncan Offers Steps to Address Education CrisisBy Miriam BridgesMay 09, 2012 America faces a skills crisis and other deep challenges in education, said U.S. Secretary of Education Arne Duncan at the annual GMM policy forum, part of ICI’s 54th General Membership Meeting. In a conversation with ICI President and CEO Paul Schott Stevens, Secretary Duncan offered a range of ways to address these challenges, including specific recommendations for the fund industry. TOPICS: Investment EducationEvents Independent Directors and Trustees Deeply Concerned About More Changes to Money Market FundsBy Amy LancellottaMay 09, 2012 As the SEC continues to consider flawed proposals that would have far-reaching consequences for money market funds, two groups representing mutual fund independent directors and trustees released a joint statement registering their deep concerns about any further changes to the regulation of these funds. TOPICS: Fund GovernanceMoney Market Funds Our Commitment to Advancing the Interests of InvestorsBy Paul Schott StevensMay 09, 2012 This week, the fund industry gathers in Washington, DC, for ICI’s General Membership Meeting. This annual conference, which draws together several robust programs, offers us a chance to engage with colleagues across the industry landscape, to deepen our understanding of our businesses, and reaffirm the values that have made this industry one that serves more than 90 million shareholders. TOPICS: Financial MarketsEvents ICI Research Shows That Commodity Mutual Funds Are Not Driving Commodity MarketsBy Paul Schott StevensMay 09, 2012 Investors benefit greatly from funds that provide investors exposure to a broad basket of commodities—from energy to precious metals to agricultural products. These investments offer valuable portfolio diversification, because commodities prices historically have not been strongly correlated with stock or bond returns. And as raw materials for the goods that businesses and consumers buy, commodities offer investors an opportunity to protect themselves from inflation. TOPICS: Commodity Investments Rulemaking Must Reflect Realities of Funds’ Access to Shareholder InformationBy Kathleen Joaquin and Tamara K. SalmonApril 30, 2012 We are seeing a troubling development in Washington. In high-profile areas such as money market funds and anti–money laundering measures, regulators continue to pursue rules premised on the notion that mutual funds know or can obtain detailed information on each of their underlying shareholders. TOPICS: Fund RegulationMoney Market FundsOperations and Technology Allegations Made in Indiana University Study Are Speculative and DubiousBy Robert C. GrohowskiApril 27, 2012 Thanks to mutual funds’ structure and regulation, fund investors enjoy a number of protections. One among them is that advisers to funds, as well as directors on fund boards, have fiduciary duties. This means they have a fundamental, legal obligation to act in the best interests of the fund—and its shareholders—with undivided loyalty and utmost good faith. TOPICS: Fund Regulation Article in The Week Misrepresents Americans’ View of 401(k)sBy Sarah HoldenApril 26, 2012 Contrary to recent reporting by The Week (“401(k)s Are Failing Millions of Americans,” April 22, 2012), American workers both value their 401(k) retirement savings plans and are confident that 401(k)s will help them meet their retirement goals. TOPICS: Retirement Research Data Update: Prime Money Market Funds’ HoldingsBy Emily Gallagher and Chris PlantierApril 20, 2012 In October and December, we discussed how portfolio managers of U.S. prime money market funds have addressed the ongoing debt crisis in the eurozone. In February, we responded to commentators’ suggestions that U.S. prime money market funds’ increase in eurozone holdings in January reflected a renewed appetite for risk. TOPICS: Financial MarketsMoney Market Funds Washington Post Mischaracterizes the Strongest Federal Securities LawBy Paul Schott StevensApril 20, 2012 Today I submitted the following letter to the editor of the Washington Post: Without a doubt, our federal securities laws and the regulations that implement them may be improved and are worthy subjects for journalistic scrutiny. David Hilzenrath wasted an opportunity to advance that discussion with his recent article. Rather than focus on genuine weaknesses in the system, he mischaracterizes and criticizes the strongest law in the federal securities arsenal and a regulatory tool that has brought untold benefits to investors. TOPICS: Fund Regulation Key Data Undercut Critics’ Arguments on ETFs and Intraday VolatilityBy Rochelle AntoniewiczApril 19, 2012 Over the past year, several news stories have focused on stock market volatility, particularly the price swings that occur in the hour prior to the U.S. market’s 4:00 p.m. close. “What’s Behind That Wild Final Hour of Trading?” asked CNNMoney last November. Commodity Price Trends: It’s Fundamentals, Not FundsBy Chris PlantierApril 17, 2012 As gasoline prices approach a national average of $4 per gallon, the role that financial investment flows into commodities markets play is once again in focus. In a forthcoming paper, I examine the relative importance of economic fundamentals and financial investment flows in explaining broad commodity price movements. TOPICS: Commodity InvestmentsFinancial Markets All Funds and Investors Have a Stake in Our Challenge to CFTCBy Paul Schott StevensApril 17, 2012 ICI and the U.S. Chamber of Commerce have joined together in a legal challenge to a rule by the Commodity Futures Trading Commission (CFTC). We are asking the U.S. District Court for the District of Columbia to vacate and set aside the CFTC’s recent amendments to its Rule 4.5. TOPICS: Financial MarketsCommodity Investments Money Market Funds and Financial Stability: Reason and the Facts Must Guide RegulatorsBy Paul Schott StevensApril 04, 2012 We are pleased to see that the Financial Stability Oversight Council continues to take a thoughtful approach on the issue of designating “systemically important financial institutions.” That’s in stark contrast to some commentators, who would have regulators rush to put money market funds under that designation. As ICI has argued in a number of venues, a “SIFI” designation is inappropriate for these funds and plainly would run counter to facts and reason. Let’s review why. Addressing the Economic and National Security Implications of Our Fiscal CrisisBy Paul Schott StevensMarch 30, 2012 As expressed forcefully by a group of fund industry leaders last November, America’s current budgetary overreach has clear and dire implications for the 90 million investors that ICI member companies serve. Today, I elaborated on those implications in a speech before a gathering of the National Strategy Forum in Chicago. What does our recent and unprecedented buildup of debt mean for our economy and our national security? TOPICS: Financial Markets What Happens If ‘Floating’ Funds Don’t Float?By Jane Heinrichs and Greg SmithMarch 29, 2012 Some recent coverage—including the CFOJournal blog of the Wall Street Journal—suggests that worries about the impact on investors of forcing money market funds to float their net asset value (NAV) may be overblown. The story goes like this: the mark-to-market prices of money market funds, and the experience of a few money market funds that already operate with a floating NAV, show that fluctuations in the “floating” value would be minuscule—rarely large enough to change the penny-rounded per-share price of the fund. So if floating funds don’t float, what’s the harm? TOPICS: Fund RegulationFinancial MarketsMoney Market Funds Bringing Money Market Funds’ European Investments into FocusBy Brian ReidMarch 21, 2012 In his written testimony on Capitol Hill today, Federal Reserve Board Chairman Ben Bernanke created a fuzzy and incomplete picture of money market funds and their investments in European-headquartered financial institutions. Whether by intent or not, the Fed testimony left the impression—magnified by media accounts—that these funds have a unique and substantial vulnerability to any future turmoil in overseas markets. Money Market Funds: Let’s Stick to the FactsBy: Brian ReidMarch 06, 2012 As a banking regulator who was in office during the worst banking crisis since the Great Depression, Sheila Bair knows that banks and money market funds are not the same. Yet in her recent Huffington Post piece, Bair blurs vital distinctions in an effort to convince the reader that money market funds are in fact extremely risky banks—and thus need a stiff dose of banking regulation. TOPICS: Fund RegulationMoney Market Funds CFTC Decision Imposes Inconsistent Requirements on Funds, Hurts ShareholdersBy: Karrie McMillanMarch 05, 2012 The Commodity Futures Trading Commission (CFTC) recently finalized a rule—known as Rule 4.5—that will require many advisers to mutual funds that invest in commodity futures, commodity options, and swaps to register with the agency. This development is deeply troubling for at least two reasons:
TOPICS: Fund RegulationCommodity Investments The Honest Truth About Forcing Money Market Funds to FloatBy Brian ReidFebruary 29, 2012 Advocates for further regulation of money market funds string together a loose chain of arguments to create the impression that money market funds are bank products, rather than investment securities. From this, they conclude that these funds need bank-like regulation. Sallie Krawcheck’s commentary in today’s Wall Street Journal is the latest effort in this campaign. The ‘Hue and Cry’ over Money Market Funds Is a Chorus of Many VoicesBy Paul Schott StevensFebruary 24, 2012 Securities and Exchange Commission Chairman Mary Schapiro took aim at money market funds again today, this time lamenting “the hue and cry being raised by the industry” against the proposals that she champions. TOPICS: Fund RegulationMoney Market Funds The (Dis)Connection Between ETFs and Market VolatilityBy Rochelle AntoniewiczFebruary 23, 2012 In the past year, many commentators have charged that exchange-traded funds (ETFs) are responsible for driving stock market volatility to unprecedented extremes. TOPICS: Financial MarketsExchange-Traded Funds Prime Money Market Funds’ Eurozone Holdings Remain LowBy Emily Gallagher and Chris PlantierFebruary 23, 2012 Securities of eurozone issuers accounted for 14.0 percent of assets of U.S. prime money market funds in January, up from 11.9 percent in December (chart). This increase was driven by a rise in French assets (up from 3.2 percent to 4.6 percent) and by a rise in asset holdings of other eurozone issuers (up from 8.7 percent to 9.4 percent). Regulating Funds’ Use of Derivatives: Striking a Fine BalanceBy Robert C. Grohowski and Mara L. ShreckFebruary 23, 2012 Much has been written about the dangers of derivatives, from Warren Buffett’s quote about “financial weapons of mass destruction” to media coverage of derivatives’ role in various aspects of the financial crisis, such as the downfall of AIG. Far less attention has been paid to the benefits that derivatives can provide for mutual funds and their investors—allowing funds to mitigate risks, manage portfolios more efficiently, and access new strategies. TOPICS: Financial Markets Proposal to Implement Volcker Rule Raises Significant Issues for Regulated Funds GloballyBy Dan WatersFebruary 14, 2012 Congress enacted the provision of the Dodd-Frank Reform Act known as the Volcker Rule to restrict banks from sponsoring and investing in hedge funds (so-called covered funds) and using their own resources to trade for purposes unrelated to serving clients—something known as “proprietary trading.” TOPICS: Fund RegulationInternational Proposal to Implement the Volcker Rule Raises Deep Concerns for U.S. Registered FundsBy Paul Schott StevensFebruary 14, 2012 Congress enacted the provision of the Dodd-Frank Act known as the Volcker Rule to restrict banks from using their own resources to trade for purposes unrelated to serving clients—something known as “proprietary trading.” TOPICS: Fund RegulationFinancial MarketsExchange-Traded Funds A Bad Diagnosis Could Be Fatal for Money Market FundsBy Paul Schott StevensFebruary 13, 2012 Bad diagnosis leads to bad prescriptions—and the errors can be fatal. The Wall Street Journal’s lead editorial today, “Money Fund Make-Over,” falls into that trap. The Rx of this editorial is premised on the notion that money market fund investors don’t understand that they’re just that—investors. Yet every fund’s prospectus provides a clear description of all risks and rewards associated with the fund. No fund offers any expectation of an explicit or implicit guarantee by the fund sponsor or the U.S. government. That message is repeated in virtually every communication from money market funds to investors. TOPICS: Fund RegulationMoney Market Funds Amended CFTC Rule 4.5 Appears to Impose Unnecessary Burdens on Many Mutual Fund AdvisersBy: Rachel McTagueFebruary 10, 2012 On February 8, the Commodity Futures Trading Commission (CFTC) issued amended Rule 4.5, a regulation governing commodity pool operators (CPOs), as well as a related rule proposal. Among other changes, the amendments to the rule significantly narrow the ability of registered investment advisers to rely on the rule’s exclusion from regulation as a CPO. As a result, many advisers will be required to register with the CFTC even though they are already regulated by the Securities and Exchange Commission (SEC). TOPICS: Fund RegulationCommodity Investments Achieving the Proper Balance on FATCABy Keith LawsonFebruary 08, 2012 ICI and ICI Global have engaged actively with Treasury and the Internal Revenue Service (IRS) as they have crafted the proposed Foreign Account Tax Compliance Act (FATCA) regulations, which were issued today. Our message has been simple: ensure that the tax compliance benefits anticipated by FATCA, which we support strongly, justify the costs that will be imposed. TOPICS: Taxes The SEC’s Money Market Fund Plans—Scoring a Hat Trick Against Investors and the EconomyBy Paul Schott StevensFebruary 07, 2012 The Wall Street Journal reports today that the Securities and Exchange Commission (SEC) continues to pursue regulatory changes for money market funds that will harm investors, damage financing for businesses and state and local governments, and jeopardize a still-fragile economic recovery. Quite a regulatory hat trick. TOPICS: Fund RegulationMoney Market Funds An Important Step in the Process of Enhancing 401(k) Fee DisclosureBy Ianthé ZabelFebruary 03, 2012 On February 2, the Department of Labor (DOL) issued final regulations concerning 401(k) disclosures. The rule requires companies that administer defined contribution plans to disclose administrative and investment costs to employers who sponsor the plans. TOPICS: Retirement Policy Fund Investment in Commodities Provides Opportunity and Diversification for InvestorsBy Karen Lau Gibian and Rachel H. GrahamJanuary 26, 2012 On Capitol Hill, a hearing at the Permanent Subcommittee on Investigations (PSI) raises questions about mutual fund investors’ ability to get commodity exposure in their portfolios and suggests the Internal Revenue Service (IRS) should no longer allow this type of investment. TOPICS: Fund RegulationCommodity InvestmentsFinancial MarketsTaxes Featured Chart: Americans Say Retirement Saving Incentives Should Be a National PriorityBy Sarah A. HoldenJanuary 26, 2012 Stresses on the U.S. government budget have resulted in a reexamination of national priorities with respect to taxes and government spending. Against that backdrop, our survey of 3,000 U.S. households for our recent research report—America’s Commitment to Retirement Security: Investor Attitudes and Action—contained a new question. Households were asked: “Do you agree that continuing to provide incentives to encourage retirement saving should be a national priority?” TOPICS: Retirement Research ETF Basics: The Creation and Redemption Process and Why It MattersBy Mara Shreck and Shelly AntoniewiczJanuary 19, 2012 One benefit of exchange-traded funds (ETFs) is that they give investors access to a range of strategies and indexes, with the flexibility of transacting throughout the trading day at prices that typically approximate the value of the fund’s underlying portfolio. To see how ETFs accomplish this, one must understand how ETF shares are created and redeemed. TOPICS: Exchange-Traded Funds ICI Registers Deep Concerns with the Volcker Rule ProposalBy Rachel H. GrahamJanuary 18, 2012 The “Volcker Rule” provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act was written to restrict banks from using their own resources to trade for purposes unrelated to serving clients. While the Volcker Rule was not directed at U.S. mutual funds and other registered investment companies, its proposed implementation raises deep concerns for the U.S. registered fund industry. TOPICS: Fund RegulationFinancial Markets Volcker Rule Implementation Threatens Global Investment Funds and Their ShareholdersBy Dan WatersJanuary 18, 2012 The proposed implementation of the so-called Volcker Rule has serious implications for global investment funds and their shareholders. Like our U.S.-based ICI colleagues, ICI Global has today voiced concerns about this rule in a statement to the U.S. House subcommittees examining how the rule will impact markets and investors. TOPICS: Fund RegulationFinancial Markets Data Update: Money Market Funds and the Eurozone Debt CrisisBy Emily Gallagher and Chris PlantierJanuary 13, 2012 In October and December, we discussed how portfolio managers of U.S. prime money market funds have addressed the ongoing debt crisis in the eurozone. Here is a look at the latest monthly data on these funds’ holdings by home country of issuer. Holdings of French issuers continued to fall in December, and almost 80 percent of these French holdings are either short-dated collateralized repurchase agreements or other instruments that mature in seven days or less. TOPICS: Financial MarketsMoney Market Funds PCAOB Must Demonstrate Need for Mandatory Audit Firm RotationBy Amy Lancellotta and Gregory SmithDecember 22, 2011 The Independent Directors Council (IDC) and the Investment Company Institute (ICI) oppose requiring a mandatory rotation of audit firms as detailed in a concept release from the Public Company Accounting Oversight Board (PCAOB). ICI Adds to Educational Resources on Exchange-Traded FundsBy Mike McNameeDecember 16, 2011 ICI Adds to Educational Resources on Exchange-Traded Funds. TOPICS: Exchange-Traded Funds Money Market Funds Continued to Reduce Eurozone Holdings in NovemberBy Sean Collins and Chris PlantierDecember 16, 2011 Over the last year, U.S. money market funds have significantly reduced their holdings of debt securities issued by banks and other businesses headquartered in the 17 countries that use the euro as their currency. That trend continued in November. TOPICS: Financial MarketsMoney Market Funds Time to Stamp Out the Confusion Around ‘Shadow Banking’By Brian ReidDecember 06, 2011 In the United States, money market funds are governed by tight risk-limiting rules, rules that have become considerably tighter since 2008. The Securities and Exchange Commission (SEC) has indicated further changes are forthcoming. Yet some recent commentary and reporting on money market funds misses this fact, substituting instead the vague notion that these funds lurk in a seemingly unregulated world of “shadow banking,” an epithet used to debase a large group of nonbank financial intermediaries and activities. A recent Wall Street Journal column, for example, characterized money market funds as “one of the riskiest participants in shadow banking.” Last May, a Reuters story described shadow banking as “a network of loosely regulated private equity, hedge, and money funds that together are large enough to topple the global financial system.” Funds' Board Structures Promote Efficiencies and Cost Savings for ShareholdersBy Amy LancellottaDecember 05, 2011 Reporters, academics, and others who are unfamiliar with investment companies sometimes question the unusual structure of fund boards. Unlike operating companies—where each company as a rule is overseen by its own board—multiple funds in a complex typically share common boards. In Overview of Fund Governance Practices, 1994-2010, we found that 83 percent of fund complexes use a “unitary board” (one board for all their funds), while 17 percent use “cluster boards” (two or more boards, each overseeing a group of funds within the complex). TOPICS: Fund Governance Data Update: Money Market Funds and the Eurozone Debt CrisisBy Sean Collins and Chris PlantierDecember 02, 2011 In October, we discussed how portfolio managers of U.S. prime money market funds have addressed the ongoing debt crisis in the eurozone. Here is a look at the latest monthly data on these funds’ holdings by home country of issuer. We will revisit the topic in mid-December with updated analysis once November figures become available. TOPICS: Financial MarketsMoney Market Funds Now Is the Time to Put America on a Path of Fiscal ResponsibilityBy Paul Schott StevensNovember 21, 2011 On behalf of funds and the 90 million investors that they serve, fund industry leaders are sending a simple but urgent message to Congress and the White House: the time has arrived to put America’s fiscal house in order. Thirty executives of companies represented on ICI’s Board of Governors, the chair of the Independent Directors Council, and I are joining together to send a letter to the co-chairs of the Joint Select Committee on Deficit Reduction—known as the “Super Committee”—every other member of Congress, and the President. TOPICS: TaxesFinancial Markets Deloitte/ICI Study Shows Retirement Plan Fees Driven Primarily by Plan Size, Asset AllocationBy Sarah HoldenNovember 16, 2011 According to a comprehensive new study, primary factors driving fees in 401(k) and other defined contribution retirement plans are the number of plan participants and average participant account balance, as well as the allocation of plan assets to equity investment options. TOPICS: Retirement ResearchPolicy Research A Thoughtful Approach to Regulating Derivatives and Protecting InvestorsRobert C. GrohowskiNovember 08, 2011 A Thoughtful Approach to Regulating Derivatives and Protecting Investors TOPICS: Fund Regulation Washington Post Columnist Ignores Regulation, Transparency of FundsBy Paul Schott StevensNovember 07, 2011 Today I submitted the following letter to the editor of the Washington Post: Mutual funds are among the most regulated and transparent investment vehicles available, with investor protection as a defining principle. In his Sunday column, Steven Pearlstein chose to ignore that record. TOPICS: Fund RegulationFinancial Markets ICI Responds to Hearing on Excessive SpeculationBy Stephanie Ortbals-TibbsNovember 03, 2011 ICI issued the following statement in response to today’s hearing, “Excessive Speculation and Compliance with the Dodd-Frank Act,” before the Senate’s Permanent Subcommittee on Investigations. TOPICS: Fund RegulationCommodity InvestmentsFinancial MarketsExchange-Traded Funds The Volcker Illusion: Why Bank Regulation Won't Work for Money Market FundsBy Paul Schott StevensOctober 24, 2011 The Volcker Illusion: Why Bank Regulation Won't Work for Money Market Funds TOPICS: Fund RegulationMoney Market Funds ICI Responds to Hearing on Exchange-Traded FundsBy Stephanie Ortbals-TibbsOctober 19, 2011 ICI issued the following statement in response to today’s hearing in the Senate Banking Subcommittee on Securities, Insurance, and Investment, “Market Microstructure: Examination of Exchange-Traded Funds.” TOPICS: Fund RegulationFinancial MarketsExchange-Traded Funds The Facts Missing From a Wall Street Journal Column on Money Market FundsBy Mike McNameeOctober 18, 2011 Misinformation lurks in a recent column from Wall Street Journal Money & Investing editor Francesco Guerrera, “Hidden Dangers Lurking in Money Market Funds.” Given the vital role that money market funds play in our economy, regulators and investors alike need the best information possible on this topic. So let’s correct the record with a few key facts. TOPICS: Fund RegulationMoney Market Funds Money Market Funds’ Prudent Response to European ChallengesBy Sean Collins and Chris PlantierOctober 14, 2011 The ongoing debt crisis in the eurozone poses challenges for portfolio managers of U.S. prime money market funds, as those managers actively continue to adjust their holdings to meet new developments. The latest monthly data on money market funds’ holdings demonstrate that these funds are carefully managing their risks in Europe, and have been gradually reducing eurozone holdings for some time now. TOPICS: Financial MarketsMoney Market Funds Investors and Their Long-Term Commitment to SavingBy Paul Schott StevensOctober 14, 2011 This week, I had the pleasure of addressing members of the Rotary Club of Seattle on “The Outlook for Investors and Investing.” My speech approached this subject in part by examining our present situation in the historical context of past market bubbles and downturns. TOPICS: Financial Markets Global Markets: ICI Urges Measured Policy Approaches to ReformsBy Ari BursteinOctober 12, 2011 Across the globe, regulators remain active in examining possible rule changes and other initiatives to bolster the integrity of financial markets. As these efforts proceed, ICI has urged balanced policy responses that can strengthen markets while preserving and enhancing efficiency that benefits funds and their shareholders. TOPICS: Financial Markets A New Voice for Global Investment FundsBy Paul Schott StevensOctober 10, 2011 Over the past two decades, the world has witnessed the rise of asset managers as global financial intermediaries. The fund industry has been at the forefront of this movement, vigorously expanding its international reach and offering investors opportunities to diversify and to access new markets. TOPICS: InternationalICI Global Mutual Fund Investors Remain Steady Despite Volatile MarketBy Brian Reid and Chris PlantierSeptember 30, 2011 Each month, ICI reports definitive long-term mutual fund flows, made up of stock, bond, and hybrid funds. The Institute also provides an estimate of weekly flows for those funds. It’s important to consider both weekly and monthly data when interpreting the activity of fund investors. Despite sizable August outflows, more-recent weekly data suggest that investors remain cautious but steady. TOPICS: Financial Markets A Win for Both Fund Advisers and the SECBy Tami SalmonSeptember 28, 2011 In October 2010, ICI began to work with staff at the Securities and Exchange Commission (SEC) to obtain no-action relief from a recordkeeping requirement of the “pay-to-play” rule, which the SEC adopted in July 2010. SEC staff recently granted that no-action relief, a positive development both for advisers to mutual funds and the SEC’s staff. TOPICS: Fund Regulation Commentary: Court Strikes Down SEC’s Proxy Access RuleBy Dorothy A. BerrySeptember 14, 2011 On July 22, the United States Court of Appeals for the District of Columbia Circuit vacated the proxy access rule adopted by the Securities and Exchange Commission (SEC) last year. The court found that the SEC had failed to adequately assess the economic effects of the rule and noted in particularly harsh terms the SEC’s failure to adequately address the rule’s impact on investment companies. The case was brought by the Business Roundtable and the U.S. Chamber of Commerce, and IDC filed an amicus brief jointly with ICI in support of their petition to vacate the rule as applied to investment companies. We’re pleased with the result but disappointed that it took a litigated action to get here. TOPICS: Fund Regulation Déjà vu—U.S. Money Market Funds and the Eurozone Debt CrisisBy Chris Plantier and Sean CollinsSeptember 12, 2011 In June, we wrote about the indirect exposure that U.S. prime money market funds have to European sovereign debt, especially Greek debt, through their holdings of securities issued by European banks. At that time, we noted that these funds had no direct exposure to Greek sovereign debt, and that they were managing their indirect exposure by constantly examining the quality of their portfolio and the creditworthiness of investments. By July 1, we could report that U.S. prime money market funds had no direct exposure to Portuguese or Irish government or bank debt. TOPICS: Money Market Funds Changes to Cost Basis Rules Provide Investors More FlexibilityBy Karen Lau GibianAugust 26, 2011 In a positive development for fund shareholders, the Department of the Treasury and the Internal Revenue Service have issued new cost basis reporting rules that enhance a fund’s ability to provide shareholders with average cost basis information. Fund shareholders have become quite familiar with average cost basis information, which many funds have been providing to their shareholders voluntarily for 20 years or more. The regulatory change makes it more likely that funds will continue to use this method as their default method for redeemed shares. TOPICS: Taxes New York Times Editorial Misrepresents the Behavior of 401(k) InvestorsBy Brian ReidAugust 23, 2011 TOPICS: Retirement ResearchRetirement Policy ICI Economists Provide Long-Term Mutual Fund Flow AnalysisBy Brian Reid and Chris PlantierAugust 17, 2011 All eyes were on the markets in early August just after Standard & Poor’s Corp. downgraded the long-term sovereign credit rating on the United States of America to AA+ from AAA and as Europe’s ongoing fiscal challenges dominated the news. TOPICS: Financial Markets ‘One Size Fits All’ Doesn’t Fit Today’s Fund InvestorsBy Brian ReidAugust 16, 2011 David F. Swensen is the chief investment officer of Yale University and a noted author of investment advice for the public. In books and articles over the last decade, he’s focused much of his attention on mutual funds. Yet he consistently ignores or is unaware of basic facts about how mutual funds operate, how investors seek and use funds, and how individuals manage their portfolios—gaps on full display in his latest commentary in the New York Times last weekend. TOPICS: Investment EducationInvestor Research The Uphill Path to Better Economic Analysis in RulemakingBy Paul Schott StevensAugust 10, 2011 Last month, the United States Court of Appeals for the District of Columbia Circuit vacated the Securities and Exchange Commission’s rule on proxy access. The unanimous ruling marked the fifth time since 2005 that the DC Circuit has struck down an SEC rule, and the third decision based on the agency’s failure to properly weigh economic consequences and to consider—as the law requires—the effects of its rules on efficiency, competition, and capital formation. TOPICS: Fund RegulationCommodity Investments Standard & Poor’s Downgrades U.S. Government DebtBy Mike McNameeAugust 06, 2011 On Friday, August 5, Standard & Poor’s Corp. downgraded the long-term sovereign credit rating on the United States of America to AA+ from AAA. The agency reaffirmed the U.S. government’s A-1+ short-term rating, which is the rating that money market funds rely upon in making their investment decisions. Moody’s Investor Services and Fitch Ratings Ltd. have reaffirmed their Aaa and AAA ratings for long-term U.S. government debt. TOPICS: Financial Markets The Lingering Threat of Floating NAVsBy Mike McNameeAugust 05, 2011 Despite widespread opposition from dozens of business, municipal, and investors groups, regulators continue to ponder the question of whether money market funds should be required to abandon the stable $1.00 net asset value (NAV) in favor of a floating NAV. TOPICS: Fund RegulationMoney Market Funds The Debt Ceiling Debate and Its Impact on Money Market FundsBy Chris Plantier and Sean CollinsAugust 04, 2011 Data on money market funds flows continue to draw attention, especially with today’s report that net outflows totaled $66 billion in the week ending August 3. TOPICS: Money Market Funds 401(k) Plans Help Keep Americans on TrackBy Paul Schott StevensAugust 01, 2011 ICI sees strong evidence that the features of 401(k) plans help Americans avoid overreaction to financial turmoil, by countering extremes in investor behavior that hard times often produce. This was one of the key points that I made recently at the Ayco Summer InnerCircle Benefits and Compensation Conference in Saratoga Springs, New York. I invite you to look over my full presentation, which contains a trove of data and charts pertinent to retirement policy. TOPICS: Retirement Policy It’s Highly Unlikely that Money Market Funds Will ‘Break the Dollar’ in U.S. Debt CrisisBy Chris Plantier and Sean CollinsJuly 29, 2011 The continuing impasse over the U.S. government’s borrowing limit—the “debt ceiling”—and efforts to rein in the growth of federal debt has raised many questions for investors in all types of financial assets. ICI believes that money market funds are no more vulnerable to these events than other assets: As ICI Chief Economist Brian Reid wrote yesterday, “I don’t know of any scenario in which money market funds would be disproportionately affected compared to other market participants by a failure to raise the debt ceiling.” TOPICS: Money Market Funds The Comprehensive Regulatory Framework Around IRAsBy Mary S. Podesta and Elena B. ChismJuly 28, 2011 We occasionally encounter the puzzling misperception that individual retirement accounts (IRAs) are under-regulated—as in this recent Wall Street Journal story. The truth is, IRA investors benefit from a comprehensive regulatory framework, one that governs the IRA itself, IRA providers, and, in most cases, the investments that are held within the account. TOPICS: Retirement Policy What’s Happening with Recent Money Market Fund Flows?By Brian ReidJuly 28, 2011 Statistics on money market funds inflows and outflows are currently a hot topic in the financial world, so it’s a good time to dig into the data and see if we can help explain the latest trends. TOPICS: Money Market Funds ICI Recommends Fixes to Margin Proposals for Uncleared SwapsBy Heather L. TraegerJuly 22, 2011 Proposals on margin requirements for uncleared swaps could create regulatory gaps that would work against the goal of ensuring fair and orderly swap markets, ICI said in recent comment letters. We recommended changes to the proposals, which come from both banking regulators and the Commodity Futures Trading Commission (CFTC). TOPICS: Financial Markets Debt Ceiling Scenarios: ICI Addresses Key Questions Regarding Possible Impact on Money Market FundsBy Karrie McMillan and Brian ReidJuly 20, 2011 As Paul Schott Stevens wrote on ICI Viewpoints earlier, a downgrade or default of U.S. Treasury securities would have grave implications for investors, markets, and economies around the world. This prospect raises a number of questions for funds and their shareholders, particularly for money market funds. We’ve prepared a set of “frequently asked questions,” focused on money market funds, to further address the key issues and dispel some of the uncertainty produced by this unprecedented policy situation. TOPICS: Money Market Funds Let’s Preserve America’s Financial Standing in the WorldBy Paul Schott StevensJuly 18, 2011 The impasse between Congress and the Administration over increasing the U.S. Treasury’s borrowing limit and dealing with long-term budget deficits has raised many questions about the impact on American investors and investments, including mutual funds. At ICI, we share the deep concern that many feel about policy actions that could undermine the full faith and credit of the U.S. government. Numbers Show the Success of Automatic EnrollmentBy Paul Schott StevensJuly 07, 2011 A July 7 story in the Wall Street Journal makes the assertion that a recently-enacted 401(k) law “suppresses” retirement savings. The assertion rests on faulty data interpretation. Look at the proper numbers, and the truth becomes clear—the 401(k) system, thanks in part to reforms brought about by the law, known as the Pension Protection Act of 2006, in fact promotes and increases retirement saving. TOPICS: Retirement Policy Dispelling Misinformation on Money Market FundsBy Brian ReidJuly 01, 2011 The ongoing attention to U.S. prime money market funds’ exposure to the debt crisis in Greece has brought three questions to the fore: TOPICS: Money Market Funds Before Congress, an Outpouring of Support for Money Market FundsBy Mike McNameeJune 28, 2011 Groups representing businesses and government officials from across the country recently sent a message to Congress: policymakers should preserve the fundamental features of money market funds. The occasion was last week’s hearing, “Oversight of the Mutual Fund Industry: Ensuring Market Stability and Investor Confidence,” held by the House Financial Services Committee’s Subcommittee on Capital Markets and Government Sponsored Enterprises. TOPICS: Money Market Funds In Case You Missed It: Coverage of House Financial Services Committee Hearing on FundsBy Ianthé ZabelJune 28, 2011 The future of money market funds, how to define “systemic risk” to the financial system, and fiduciary standards for retirement plans were among the topics discussed at a hearing last week before the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises. ICI President Paul Schott Stevens testified at the hearing, along with representatives from ICI member firms Fidelity Management & Research Company and the Vanguard Group. TOPICS: Fund RegulationGovernment Affairs Wall Street Journal Editorial Gets It Wrong Again on Money Market FundsBy Mike McNameeJune 27, 2011 The Wall Street Journal posted another misleading editorial on money market funds. ICI President and CEO Paul Schott Stevens has submitted a letter to the editor in print and online to respond. Here is the text of his submission: TOPICS: Money Market Funds Money Market Funds and European Debt: Setting the Record StraightBy Sean Collins and Chris PlantierJune 20, 2011 Recent events in Greece have drawn the media’s attention to indirect exposure that U.S. money market funds may have to European sovereign debt through their holdings of securities issued by European banks. TOPICS: Money Market Funds DOL Should Allow E-Delivery as Default for Plan Communications, Says ICIBy Anna DriggsJune 17, 2011 Given dramatic changes in technology over the last decade, the Department of Labor (DOL) should allow retirement plans to make e-delivery the default method for communicating plan information, ICI said in a recent comment letter. E-delivery will enhance communication and improve the security and privacy of personal and account information. TOPICS: Retirement Policy ICI Supports Treasury Proposal to Maintain Efficiency and Transparency of Foreign Exchange Swaps and Forwards MarketBy Heather L. TraegerJune 16, 2011 Foreign exchange swaps and forwards are contracts that mutual funds and other investors use to help manage their portfolios. ICI members therefore have a strong interest in ensuring the market for foreign exchange (FX) swaps and forwards is highly competitive, efficient, transparent, and fair. TOPICS: Financial Markets Cracking Down on Tax Evaders Without Cracking Up U.S. Capital MarketsBy Keith LawsonJune 15, 2011 The Foreign Account Tax Compliance Act (FATCA) is a law designed to ensure that U.S. persons holding assets through accounts in foreign financial institutions comply with their U.S. tax obligations. In other words, the law aims to crack down on tax evasion through offshore investments. It is set to apply to payments made beginning January 1, 2013. TOPICS: TaxesInternational Switching to International Accounting Standards Wouldn’t Likely Benefit U.S. Fund Investors, ICI Tells SECBy Gregory M. SmithJune 14, 2011 A key issue for ICI’s Operations team is regulator interest in harmonizing worldwide accounting standards. As Donald Boteler, ICI’s Vice President for Operations and Continuing Education, said in ICI’s latest annual report, “It’s a noble purpose, but it’s a big, big challenge.” TOPICS: InternationalOperations and Technology Take One Idea Off the Table: Forcing Money Market Funds to FloatBy Mike McNameeJune 03, 2011 The Investment Company Institute would like to thank the Wall Street Journal for its balanced approach in analyzing the debate over money market fund regulation—providing countervailing views from Yale University Professor Jonathan Macey and Columbia Law School Professor Jeffery Gordon about how to make money market funds even more resilient in the face of the next financial crisis. TOPICS: Fund Regulation Recent Data Underscores How Money Market Funds Have Responded to Regulatory ChangesBy Sean Collins and Michael BreuerMay 19, 2011 One item discussed at ICI’s 2011 Money Market Funds Summit this week was how recent reforms adopted by the Securities and Exchange Commission (SEC) have made money market funds more resilient and ready to face future periods of severe market stress. The charts below, which we discussed at the summit, illustrate the idea. TOPICS: Policy Research Data Show Americans’ Commitment to Retirement SavingBy Sarah A. HoldenMay 17, 2011 Despite the financial ups and downs of recent years, 401(k) participants have proven themselves both steady and committed to retirement saving. ICI has a window into this commitment thanks to our surveys, conducted since 2008, of a cross section of recordkeeping firms representing a broad range of defined contribution (DC) plans and covering more than 23 million employer-based DC retirement plan participant accounts as of December 2010. TOPICS: Retirement Research Money Market Funds: Four Key PointsBy Mike McNameeMay 10, 2011 Later today, the Securities and Exchange Commission will hold a roundtable on money market funds and systemic risk. ICI Chief Economist Brian Reid will be one of the panelists at the roundtable, which should be an interesting discussion. Ahead of that discussion, here are four key points worth keeping in mind. TOPICS: Fund RegulationMoney Market Funds Wall Street Journal Editorial Ignores “Economic Disruption” of Floating the Value of Money Market FundsBy Ianthe ZabelMay 09, 2011 The Wall Street Journal’s lead editorial today used a flawed analysis to mischaracterize money market funds and the recent efforts to make them more resilient in extreme market conditions. ICI President and CEO Paul Schott Stevens has submitted a letter to the editor in print and online to respond. Experience Talks: Insight from Three Top Investment LeadersBy Inga VitolsMay 06, 2011 In a panel discussion moderated by John Rogers, Chairman and CEO of Ariel Investments, panelists Eddie Brown, President and CEO of Brown Capital Management, G. Stanley Cates, President of Longleaf Partners Funds, and Jack Laporte, Vice President of T. Rowe Price Associates, candidly discussed their own experiences and insight in money management and investing. TOPICS: Events |
Learn More TOPICS Commodity Investments ARCHIVE SOCIAL MEDIA BLOG SCAN ICI's Blog Scan: May 9, 2012-May 16, 2012 |
