Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOI
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Investing
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Investing

The Journal of Investing

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOI
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

A Thought or Two for Mutual Funds

Majed R. Muhtaseb
The Journal of Investing Spring 2006, 15 (1) 9-15; DOI: https://doi.org/10.3905/joi.2006.616839
Majed R. Muhtaseb
Professor, Finance Real Estate and Law, California State Polytechnic University, Pomona, CA and Managing Principal at Jude Investment Research Advisers Brea, CA.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: mmuhtaseb@csupomona.edu
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Abstract

The mutual fund industry has not been able to add value to investors through performance. The objective of this article is to direct the attention of the mutual fund industry, its regulators, and clients to lessons that can be learned from the hedge fund industry. The lessons are synthesized from the findings of a number of published empirical research articles coupled with significant developments in the fund management industry. In an op-ed letter to the WSJ Mr. John Bogle eloquently describes the state of affairs in the mutual fund industry by associating it with the Emperor's New Clothes syndrome. He reports that the costs of running an equity mutual fund is about 3%. These costs are at all-time highs. In addition, published research shows that the key factor that determines whether or not a mutual fund makes use of derivatives is membership in a given family of mutual funds. Mutual funds tend to also adopt a herd behavior in security research and selection and performance management. The compensation of the mutual fund manager is based on assets under management with no link to fund performance. Mutual fund investment strategies, unlike hedge fund strategies, are far less flexible. Hedge funds tend to generally perform well in up as well as down markets. Hedge funds sell short, leverage, use derivatives, control redemptions, and tie compensation to performance. Hedge funds use these tools for exploiting arbitrage opportunities created by indexing, herding of performance, herding of security selection, and rigid legal and institutional structures. Hedge fund managers are exposed to idiosyncratic risk. The mutual fund industry along with its key constituents, need to explore new avenues for adding value.

TOPICS: Mutual funds/passive investing/indexing, mutual fund performance

  • © 2006 Pageant Media Ltd

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Investing
Vol. 15, Issue 1
Spring 2006
  • Table of Contents
  • Index by author
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Investing.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
A Thought or Two for Mutual Funds
(Your Name) has sent you a message from The Journal of Investing
(Your Name) thought you would like to see the The Journal of Investing web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
A Thought or Two for Mutual Funds
Majed R. Muhtaseb
The Journal of Investing Feb 2006, 15 (1) 9-15; DOI: 10.3905/joi.2006.616839

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
A Thought or Two for Mutual Funds
Majed R. Muhtaseb
The Journal of Investing Feb 2006, 15 (1) 9-15; DOI: 10.3905/joi.2006.616839
del.icio.us logo Digg logo Reddit logo Twitter logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • ETFs within a Mutual Funds Portfolio
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log In
  • Update your profile
  • Give us your feedback

© 2022 Pageant Media Ltd | All Rights Reserved | ISSN: 1068-0896 | E-ISSN: 2168-8613

  • Site Map
  • Terms & Conditions
  • Cookies
  • Privacy Policy