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US MFs: A mutually very exclusive affair
New York, Jan 24: When much of an industry is beset by a scandal involving allegations investors have been cheated on a massive scale, you might expect shareholders to be storming annual meetings to get at the throats of those who have been running the show.
New York, Jan 24: When much of an industry is beset by a scandal involving allegations investors have been cheated on a massive scale, you might expect shareholders to be storming annual meetings to get at the throats of those who have been running the show.
But don’t expect that to happen in the USD 7 trillion US mutual fund business — because in most cases there are no such meetings. “If you want to be a watchdog, where do you go to bark?,” complained investor advocate Max Rottersman of fundexpenses.com.
It is a strange aspect of an industry in which 91m Americans are invested that there is no public meeting at which they can voice their opinions or exercise investor rights. When mainstream publicly-traded companies get embroiled in scandals or their performance deteriorates, shareholders at least get to raise resolutions, lobby the board and sound off at their annual meetings. Indeed, if shareholders in a less popular type of mutual fund — a closed-end fund — don’t like what their directors are doing with their investments, they can go to an annual meeting and make their views known in no uncertain terms. They can apply pressure for change — especially in Britain , where closed-end funds are known as investment trust companies and have faced groups of angry shareholders demanding answers and disclosure.
Closed-end funds have annual meetings because they are formed as exchange-traded public companies with shareholders. As a result, they must meet stock market listing requirements. However, most US mutual funds have a different structure. The vast majority are “open-end” funds in which investors do not own exchange-traded shares in a listed investment company that is obliged to hold an annual meeting.
Bureau Report
But don’t expect that to happen in the USD 7 trillion US mutual fund business — because in most cases there are no such meetings. “If you want to be a watchdog, where do you go to bark?,” complained investor advocate Max Rottersman of fundexpenses.com.
It is a strange aspect of an industry in which 91m Americans are invested that there is no public meeting at which they can voice their opinions or exercise investor rights. When mainstream publicly-traded companies get embroiled in scandals or their performance deteriorates, shareholders at least get to raise resolutions, lobby the board and sound off at their annual meetings. Indeed, if shareholders in a less popular type of mutual fund — a closed-end fund — don’t like what their directors are doing with their investments, they can go to an annual meeting and make their views known in no uncertain terms. They can apply pressure for change — especially in Britain , where closed-end funds are known as investment trust companies and have faced groups of angry shareholders demanding answers and disclosure.
Closed-end funds have annual meetings because they are formed as exchange-traded public companies with shareholders. As a result, they must meet stock market listing requirements. However, most US mutual funds have a different structure. The vast majority are “open-end” funds in which investors do not own exchange-traded shares in a listed investment company that is obliged to hold an annual meeting.
Bureau Report