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scope of vehicles for, 4749, 5160Donaldson, William, 38
The Economics of Regulation(Kahn),
regulatory control over, 57, 1516,7583
12b-1, 51, 102, 119unitary management of, 92100,
146 COMPETITIVE EQUITY
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78Economies of scale, 2223, 32Efficient market hypothesis, 23Employer-sponsored defined-contribution
pensions (401K), 3, 4, 42, 43Equity funds, 42, 44
See alsoMutual fundsExchange-traded fund (ETF), 4445,
5458Expense ratios
assumption of directors controlover, 15
definition and scope of, 12dispersion of, 89, 11, 62, 7583and investor decisions, 30large-cap fund summary, 1213
107108See also All-in fee; Brokerage services
Fiduciary dutiesadvisers, 15, 32, 7677, 83, 96, 109directors, 7677in MITs, 101, 104
Fields, Jack, 94401K retirement plans, 3, 4, 42, 43
Freeman, John, 62Front-end loads, 116, 119
Fully allocated average costs, 56Fund manager as investors representative,
73
Gartenberg v. Merrill Lynch Asset Manage-ment, Inc, 7677, 79, 81, 87
Independent financial advisers, 50, 51Index funds, 4, 4445, 63, 121122nn2
and 8Individual Retirement Accounts (IRAs),
See alsoSmall investorsIRAs (Individual Retirement Accounts),
4, 42, 43
INDEX 147
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4, 42, 43Inherent conflict, advisers vs. investors,
1617, 29, 39, 7071Institutional investors as market makers,
54Investment advisers, See Advisers,
investmentInvestment Company Act (ICA) (1940)
attempt to strengthen directors,3233
and ETF exemptions, 55and hedge fund exclusions, 5859introduction, 5and mutual fund structure, 23,
2425origins of, 1415, 2731
Kahn, Alfred, 78, 81, 82
Late-trading scandal, 34, 3639Legal fees in MITs, 102Legal framework for mutual funds, See
Investment Company Act (ICA);Securities and Exchange Commis-sion (SEC)
Legg Mason brokerage network, 50Lifecycle funds, 45
Lifestyle funds, 45Loads, 2, 32, 116, 119Losses, lack of pass-through for
investors, 117
Malkiel, Burton, 44
Middle class investors, 39See alsoSmall investors
MMFs (money market funds), 35,4344
effectiveness of free, 30and investor/adviser relationship, 71,
88mutual funds lack of, 1, 2, 8, 11,
148 COMPETITIVE EQUITY
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Money managers in SMAs, 67, 68Money market funds (MMFs), 35, 4344Monopolistic competition
and disclosure inadequacy, 8889in mutual fund structure, 13, 47,
62, 78Montgomery, John, 128n13Mutual form of organization, 84, 86, 87Mutual Fund Tax Awareness Act (2000),
118119
Mutual fundscompetitors of, 4749, 5160growth of, 4, 3135, 4046, 41historical development, 34, 23,
2427number of, 46
13, 69, 75, 127n10regulations dampening of, 511, 16, 62as substitute for regulation, 95, 96
Pricing of adviser services, incentives for,58, 1011, 1920, 76, 7880
See alsoCosts of mutual fund invest-ment; Dispersion, price
Profit limitation, directors focus on,8082, 83
Protecting Investors: A Half Century of
Investment Company Regulation,3334, 93Public utilities and mutual funds, 7778
Random Walk Down Wall Street(Malkiel), 44
Reporting requirements, SEC, 29Retirement investments
and diversification, 3and ETFs, 5758i i di k l d f 73
historical development, 2627independence of directors, 3234,
36, 3839, 7172, 128n12inherent conflict of interest issue,
70 71
INDEX 149
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investors indirect knowledge of, 73mutual fund focus of, 40types of, 3, 4, 42, 43
Risk-taking by adviser, 114115Rosenfeld v. Black, 33Roye, Paul, 124125n32
Sales charges, 2, 32, 116, 119Sales vs. money management in securi-
ties industry, 24, 25
Saxton, Jim, 118Scandals, late-trading and market timingand bank staff vs. board of directorsoversight, 106, 111directors lack of responsibility for,
124125n32
7071and investors lack of attention to
fees, 8990price dispersion analysis, 1112,
1317protection of investors, 1516, 39,
72, 98regulatory function of, 2reporting requirements, 29role in MIT, 101
and UFIC idea, 9298, 99Securities industry, mutual funds rolein, 2425, 51, 52
Separately managed accounts (SMAs),52, 6769, 126n16
Service provider, adviser as, 910, 31,
Tax lawcapital gains impact on investors, 35,
117119and investors mobility, 1819,
116 119 133 18
12b-1 fees, 51, 102, 119
Unified fee investment companies(UFICs), 92100
U i i (UIT ) 18 26
150 COMPETITIVE EQUITY
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116119, 133n18Tax overhang problem, 118Total profit, definition, 121n4Transaction costs, 22, 56
See alsoBrokerage servicesTransfer agency services, 110Trustees, board of
banks as, 5354, 100, 101, 107116and mutual form of organization, 86and mutual fund structure, 23
Trusts, businessbank common trust funds, 5354mutual funds as, 3, 23UIFs, 3435, 9293, 102103,
131n51UITs, 26, 54, 55, 100
Unit investment trusts (UITs), 18, 26,54, 55, 100
Unitary investment funds (UIFs),3435, 9293, 102103, 131n51
United Kingdommonitoring of mutual funds in,
103105mutual fund structure in,
2425price dispersion in, 910, 67, 69,
127n8
Vanguard funds, 44, 69, 8487
Weighted-average basis, dispersion of funds, 67, 68
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