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Growth in Bond Mutual Funds: A Question of Balance

By Sean Collins

April 8, 2021

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Why have bond mutual funds grown substantially in the past several years? There are two possible explanations, with very different implications:

  • One view: large inflows to bond funds have been driven by yield-seeking or return-chasing behavior. This explanation is promoted by commentators who worry that bond mutual funds could pose financial stability concerns—who fear that yield-chasing investors are likely to redeem en masse if yields on corporate bonds rise sharply and returns plummet, as might be anticipated during a financial crisis.[1]
  • The alternative view: the growth in bond fund assets has been driven more by fundamental secular trends. If this view is correct, concerns about mass redemptions should be tempered.

The evidence is strong: growth in bond mutual funds has been driven by secular trends such as stock market returns, demographics, and changes in how retirement savers invest. These trends will be described in this and the next Viewpoints. In fact, as this Viewpoints demonstrates, given the strength of those trends, what’s surprising is that investors didn’t add even more money to bond funds than they did.

Chasing Yields? Really?

Mutual fund investors, including bond fund investors, do react to market returns. But if bond fund investors have been chasing yields and returns in recent years, they’ve been doing a poor job of it. As the left panel of Figure 1 shows, from January 2010 to December 2020, investors poured a total of $1.84 trillion in new cash into taxable bond mutual funds and exchange-traded funds (ETFs) with a focus on the US market (“taxable domestic bond funds”). At the same time, they redeemed a cumulative total of almost $1 trillion from mutual funds and ETFs with a mandate to invest primarily in US stocks (“domestic equity funds”).

Figure 1
Flows to Equity and Bond Funds and Returns in Their Relevant Markets
Flows to selected equity and bond mutual funds and ETFs, January 2010 to December 2020

1 Cumulative net new cash flow to taxable domestic bond mutual funds and taxable domestic bond ETFs compared with cumulative net new cash flow to domestic equity mutual funds and broad-based (domestic) equity ETFs.

2 Annualized percentages for total market returns from January 2010 to December 2020; return on stocks is total return on the S&P 500 index and return on bonds is total return on the Bloomberg Barclays US Agg Total Return Value Unhedged USD index.

Sources: Investment Company Institute and Bloomberg

However, that was clearly not because bonds outperformed. As the right panel indicates, stocks far outperformed bonds over this period: a 14.0 percent annual average return for the US stock market, compared to 4.1 percent for the taxable US bond market.

So, the evidence that inflows have been driven primarily by yield- or return-chasing retail investors is questionable. Conversely, there’s strong evidence in favor of secular trends.

Maintaining a Balanced Portfolio

The first such trend: investors trying to keep their portfolios in balance during the long bull market in US stocks.

Figure 2
The Bull Market in US Stocks Likely Prompted Investors to Rebalance Their Portfolios
Net new cash flow and change in assets of domestic equity funds, annual, billions of dollars

Note: Domestic equity funds includes domestic equity mutual funds and broad-based (domestic) equity ETFs.

Source: Investment Company Institute

From 2010 to 2020, the bull market in stocks has powered strong growth in assets for domestic equity funds. As Figure 2 shows, in nine of the past 11 years, investors redeemed significant amounts from these funds. Nevertheless, the strong appreciation of the stock market boosted these funds’ assets far in excess of investors’ redemptions. For example, in 2017, investors redeemed $80 billion from domestic equity mutual funds, but assets in these funds increased by nearly $1.5 trillion. The same patterns were repeated—indeed, were even more pronounced—in 2019 and 2020.  

With assets in domestic equity funds rising so sharply, many investors no doubt chose to direct some of the outflows from domestic equity funds to bond funds in an effort to keep their portfolios balanced.[2] Figure 3 provides some evidence of this. From 2010 to 2020, there has been a striking inverse correlation between dollar outflows from domestic equity funds and inflows to taxable domestic bond funds.

Figure 3
Rebalancing Toward Fixed Income Boosted Inflows to Bond Funds
Net new cash flow, billions of dollars, annual

Note: The domestic equity funds category includes domestic equity mutual funds and broad-based (domestic) equity ETFs. The taxable domestic bond funds category includes taxable domestic bond mutual funds and taxable domestic bond ETFs.

Source: Investment Company Institute

This development may have been aided by automatic rebalancing tools. In recent years, investors have increasingly adopted strategies, such as model portfolios and robo-advisers, that periodically and automatically rebalance their portfolios to meet market conditions. When the stock market rises sharply, automatic rebalancing may shift investors’ balances in stocks toward fixed income or, in other words, from equity funds toward bond funds. In addition, households may tilt their periodic contributions to individual retirement accounts (IRAs) and 401(k) plans somewhat more toward bond funds.

Although investors cumulatively added more than $1.8 trillion in new flows to taxable domestic bond funds from January 2010 to December 2020, the US stock market was so strong that they arguably could have added even more.

Figure 4 illustrates this by comparing actual money flowing to taxable domestic bond funds to the amount investors should have added to maintain their 2009 allocations to bond and domestic equity funds—30 percent in bond funds and 70 percent in domestic equity funds. Investors poured a cumulative $1,843 billion in net new money into bond funds from 2010 through 2020 (dark blue). But to keep 30 percent of their assets in bond funds, they would have needed to add an additional $789 billion (light blue).[3]

Figure 4
To Maintain Balance, Households Should Have Purchased Even More Bond Funds
Net inflows to taxable domestic bond funds, billions of dollars, cumulative by year

Note: Taxable domestic bond funds includes taxable domestic bond mutual funds and taxable domestic bond ETFs.

Source: Investment Company Institute

This analysis suggests that portfolio rebalancing alone may be sufficient to explain the strong demand for bond funds in the past decade. But there are other fundamental secular factors driving that growth as well—factors that I’ll discuss in my next post.

Sean Collins is chief economist of ICI.

Other Posts in This Series

  • Bond Mutual Fund Outflows: A Measured Investor Response to a Massive Shock
  • What’s in a Name, Redux: For Bond Mutual Funds, “Corporate” Matters
  • Growth in Bond Mutual Funds: See the Whole Picture
1 See, for example, Jaewon Choi and Mathias Kronlund, “Reaching for Yield in Corporate Bond Mutual Funds,” The Review of Financial Studies (2018).

2 Redemptions from domestic equity funds may also, in part, have flowed to funds focusing on world stock and bond markets, as well as to collective investment trusts focusing on US and world stock and bond markets.

3 In 2009, the ratio of assets in taxable domestic bond funds to the total assets of taxable domestic bond funds plus domestic equity funds was 30 percent. The analysis in Figure 4 takes as given annual stock and bond market returns (as measured by the S&P 500 index and the Bloomberg Barclays US Agg Total Return Value Unhedged USD index, respectively). It also takes as given actual annual net new cash flows to taxable domestic bond funds and domestic equity funds. Given these, the analysis makes hypothetical purchases or sales of these two types of funds that are sufficient to keep the ratio of assets in bond funds at 30 percent at the end of each year. The analysis makes these hypothetical purchases or sales sequentially, taking 2009 as a starting point and proceeding year by year until 2020.

TOPICS: Bond FundBondsCOVID-19Corporate BondsFinancial MarketsFinancial StabilityFund RegulationMutual FundPolicy ResearchShareholder

Grow Your Money Skills…It’s Financial Literacy Month!

By Miriam Bridges

April 1, 2021

April showers bring…Financial Literacy Month! The ICI Education Foundation is sharing resources you can use to build your investment and savings skills. Financial literacy can lead you to greater financial well-being—and help you achieve goals such as education, home ownership, and a comfortable retirement. And those will last a lot longer than May flowers.

Read more…

TOPICS: 401(k)Equity InvestingIRAInvestment EducationInvestor ResearchMutual FundRetirement PolicySavingsShareholder

Traditional and Roth IRAs Offer Choice and Flexibility

By Sarah Holden and Daniel Schrass

March 29, 2021

Whether opened with rollovers or contributions, whether traditional or Roth, individual retirement accounts (IRAs) offer investors access to a world of investing. With $12.2 trillion in assets, IRAs represent more than one-third of total US retirement market assets and more than one-tenth of all US household financial assets. In mid-2020, 47.9 million US households, or 37.3 percent, owned IRAs.

Read more…

TOPICS: Equity InvestingIRARetirement ResearchSavingsShareholder

Fund Investors’ Expenses Are Falling on Both Sides of the Pond

By Shelly Antoniewicz, James Duvall, and Giles Swan

March 24, 2021

Data on UCITS ongoing charges have become more widely available to investors in recent years. Enhancements to costs and charges disclosures that UCITS and distributors make available to investors have provided them with a wealth of beneficial information, which we believe can be further enhanced.

Read more…

TOPICS: Equity InvestingEuropeFund RegulationICI GlobalInternationalShareholder

Growth in Bond Mutual Funds: See the Whole Picture

By Sean Collins and Shelly Antoniewicz

March 19, 2021

In the past decade, a number of regulators and academics have discussed concerns about the growth in the assets of bond mutual funds, as well as their increasing share of the bond market, especially the corporate bond market. The concern is that bond fund investors, now playing a much larger role in the bond market, might massively redeem their fund investments during a market correction, potentially amplifying market stresses. A closer look at the data, however, reveals aspects of the growth in bond funds that should help assuage such concerns.

Read more…

TOPICS: Bond FundBondsCOVID-19Corporate BondsFinancial MarketsFinancial StabilityFund RegulationMutual FundPolicy ResearchShareholder

What’s in a Name, Redux: For Bond Mutual Funds, “Corporate” Matters

By Sean Collins

March 11, 2021

Policymakers around the globe are studying the pandemic-related turmoil of March 2020 to determine what happened and why. Bond mutual funds have been one area of focus, and policymakers will be considering the data to assess whether structural reforms might be warranted. But gaps in understanding how regulated funds operate are adding to a flawed narrative about what happened last March—and are distorting analysis of the corporate and Treasury bond markets.

Read more…

TOPICS: Bond FundBondsCOVID-19Corporate BondsFinancial MarketsFinancial StabilityFund RegulationMutual FundPolicy ResearchShareholder

Bond Mutual Fund Outflows: A Measured Investor Response to a Massive Shock

By Sean Collins

March 4, 2021

In recent months, we have seen many high-profile analyses arguing that bond mutual funds amplified stresses in financial markets during the start of the COVID-19 pandemic in March 2020. These analyses conclude that bond mutual funds therefore may require structural regulatory reforms. But as the information in this ICI Viewpoints and others to follow indicates, policymakers should not jump to that hasty conclusion.

Read more…

TOPICS: Bond FundBondsCOVID-19Corporate BondsFinancial MarketsFinancial StabilityFund RegulationMutual FundPolicy ResearchShareholder

To Do: Check Your Savings Goals This Week!

By Miriam Bridges

February 22, 2021

This week, the Investment Company Institute (ICI) and the ICI Education Foundation (ICIEF) are joining thousands of corporations, nonprofits, government agencies, and individuals to celebrate America Saves Week. This annual campaign encourages Americans to assess their financial situations, set savings goals, and implement plans to achieve them.

Read more…

TOPICS: 401(k)Equity InvestingIRAInvestment EducationInvestor ResearchMutual FundRetirement PolicySavingsShareholder

All You Need Is Love…and a Spousal IRA

By Sarah Holden

February 11, 2021

As you’re racking your brain to find that perfect Valentine’s Day gift, you might want to consider, whether for yourself or your spouse, a contribution to an individual retirement account (IRA).

Read more…

TOPICS: IRARetirement ResearchSavingsShareholder

Main Street Owns Wall Street

By Sarah Holden and Michael Bogdan

February 10, 2021

Stock ownership used to conjure up images of Wall Street—but today people all up and down America’s Main Streets own stocks and are counting on stock ownership to help realize their financial goals. Today, more Americans own stock than in the past—and stock ownership has become increasingly common for lower- and middle-income households.

Read more…

TOPICS: Equity InvestingInvestor ResearchMutual FundRetirement PolicySavingsShareholder

Mutual Funds: Rated G—All Audiences Admitted

By Sarah Holden and Dan Schrass

February 4, 2021

Investing is subject to many misconceptions, including the notion that only older households, or only wealthy households, or only households saving for retirement own mutual funds. The reality is that households of all ages, all incomes, and with a wide range of financial goals, own mutual funds.

Read more…

TOPICS: Investor ResearchMutual FundRetirement PolicySavingsShareholder

Survey Confirms: Despite COVID-19, Retirement Savers Protect Their Accounts

By Sarah Holden and Daniel Schrass

February 2, 2021

A new national survey by ICI addresses how Americans responded to the financial pressure since the onset of the COVID-19 pandemic, with special emphasis on whether they’ve tapped their retirement accounts. The results show that a strong majority (65 percent) of US individuals did not take financial actions as a result of COVID-19.

Read more…

TOPICS: 401(k)COVID-19Financial StabilityIRARetirement Research

Understanding Indexes and How Funds Use Them

By Matthew Thornton

January 28, 2021

Beyond the well-known indexes that we encounter daily lie more than three million indexes designed to reflect the performance of underlying investments, from broad markets to niche subsegments. Indexes vary widely with regard to their specific objectives, the methodologies on which they are built, and the underlying investments they reflect.

Read more…

TOPICS: Equity InvestingExchange-Traded FundsFinancial MarketsFund RegulationIndex Fund

2020 Annual Report to Members: A Conversation with IDC Managing Director Thomas Kim

By Thomas Kim

January 21, 2021

As Thomas Kim finished his first year as IDC's managing director, he sat down to discuss the organization’s priorities.

Read more…

TOPICS: Fund GovernanceIDC

2020 Annual Report to Members: Roundtable: The Fund Industry’s Response to COVID-19

By Patrice Bergé-Vincent, Marty Burns, and Susan Olson

January 19, 2021

For the 2020 Annual Report to Members, three members of ICI’s leadership sat down to share their thoughts on how the Institute and the fund industry have navigated the COVID-19 crisis.

Read more…

TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder

2020 Annual Report to Members: A Conversation with Paul Schott Stevens

By Paul Schott Stevens

January 14, 2021

Paul Schott Stevens, ICI’s longest-serving chief executive, retired at the end of 2020. As he neared the end of his 16 years of service, he sat down with ICI staff to discuss the events of his tenure.

Read more…

TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder

2020 Annual Report to Members: A Letter to ICI’s Membership

By George C. W. Gatch

January 11, 2021

2020 will go down in history as a year that none of us can ever forget. It was a year of turmoil, fear, and reckoning. Yet for the regulated fund industry, it also proved to be a year of resilience, transition, and great hope.

Read more from ICI Chairman George C. W. Gatch’s letter that was released in ICI’s 2020 Annual Report to Members.

Read more…

TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder

Value Is in the Eye of the UCITS Holder

By Giles Swan

December 3, 2020

ICI research shows a steady decline in the cost of UCITS investing. European regulators are looking beyond just declining cost, however, by requiring UCITS managers to justify the value of these funds to investors. But how do investors assess value relative to cost, and what is the role of regulators? 

Read more…

TOPICS: Equity InvestingEuropeFund RegulationICI GlobalInternationalShareholder

Market Turmoil and Liquidity Crunch Rooted in the COVID-19 Pandemic

By Sean Collins

October 14, 2020

The first paper in ICI’s new research series, “The Impact of COVID-19 on Economies and Financial Markets,” focuses on the relationship between the pandemic, the economic shutdown it triggered, and the volatility that gripped the markets.

Read more…

TOPICS: BondsCOVID-19Corporate BondsFinancial MarketsFinancial StabilityMutual Fund

Investing Basics: Saving for Retirement with a 401(k) Plan

By Christina Kilroy

September 9, 2020

The ICI Education Foundation’s Investing Road Trip ends at retirement, depicted with idyllic images of a park bench and a golf cart. But what if, in real life, your path doesn’t quite follow this tidy path? Even for workers who get a late start, hit some bumps, and take a few detours, saving for retirement is still possible. Here are guideposts for 401(k) saving as you journey to retirement.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Investing Basics: Saving for Retirement on Your Own

By Christina Kilroy

August 31, 2020

A majority of workers aged 26 to 64 were active participants in a workplace retirement plan in 2017, according to ICI’s most recent tabulation of tax data. But what if you don’t have access to a workplace retirement plan? You still have great options to save for retirement with similar advantages to the 401(k). Learn more in the latest installment of ICI Education Foundation’s investing basics series.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Congress Should Give Americans Flexibility to Keep Retirement Savings on Track

By Paul Schott Stevens

July 31, 2020

As policymakers take further steps to assist families and businesses weathering the storm, Congress can help American families get their retirement savings goals back on track by including the “Temporary Coronavirus-Related Catch-Up Contribution” proposal in the next COVID-19 relief package.

Read more…

TOPICS: 401(k)Government AffairsIRAMutual FundRetirement PolicyShareholder

Investing Basics: Understanding Fees and Expenses

By Christina Kilroy

July 30, 2020

In the ICI Education Foundation’s Investing Road Trip exhibit, a toll booth illustrates the fees and expenses that are part of investing. Every vehicle on a toll road pays and some of that money helps to maintain the road, which ultimately makes for a smoother and safer trip for everybody. Likewise, every investor pays a cost to invest but receives professional management and services in return.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

IRA Investors Are Concentrated in Lower-Cost Mutual Funds

By James Duvall

July 30, 2020

Individual retirement accounts (IRAs) represent the largest share of assets in the US retirement market, with assets totaling $11.0 trillion at year-end 2019. As part of an ongoing effort to shed light on important insights into IRA investing, ICI is updating its analysis of expense ratios that investors pay on mutual funds in their IRAs.

Read more…

TOPICS: 401(k)Bond FundEquity InvestingIRAMutual FundRetirement ResearchShareholder

A New Benchmark for Distribution Oversight

By Ahmed Elghazaly

July 21, 2020

On June 1, the fund industry achieved a milestone for global cooperation. In an industry-led agreement, fund distributors and fund managers of Undertakings for the Collective Investment in Transferable Securities (UCITS) and alternative investment funds (AIFs) joined together to issue a common protocol for distribution oversight.

Read more…

TOPICS: EuropeFund GovernanceFund RegulationGlobalICI GlobalInternationalOperations and TechnologyShareholder

Investing Basics: Compound Returns and the Power of Reinvestment

By Christina Kilroy

June 29, 2020

Start saving early. You’ve heard it once, you’ve heard it a million times. There are a few reasons why that’s a good idea—to get in the habit, to manage risks to your investments and income, and to allow more time to contribute to your savings and let them grow. But the strongest case for starting early boils down to one phrase: compound returns.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Tax Filing Deadline Extended to July 15: What It Means for IRA Savers

By Christina Kilroy

June 18, 2020

On March 21, 2020, the Treasury Department and Internal Revenue Service (IRS) extended the federal income tax filing due date—also known as Tax Day—for the 2019 tax year. Workers now have until July 15 to prepare their 2019 tax returns, as well as more time to consider options to potentially reduce taxable earnings. One of the easiest and most popular ways to reduce taxable earnings is contributing to an individual retirement account (IRA).

Read more…

TOPICS: IRAInvestment EducationRetirement ResearchSavingsTaxes

2020 Investment Company Fact Book: Letter from the Chief Economist

By Sean Collins

May 19, 2020

A version of this letter by ICI Chief Economist Sean Collins was released in the Institute’s 60th edition of the Investment Company Fact Book.

Read more…

TOPICS: Financial MarketsFund RegulationGlobalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder

The US Retirement System Is Stronger Than Critics Portray

By Paul Schott Stevens

May 18, 2020

A recent Washington Post opinion piece paints an inaccurate and misleading picture of the US retirement system by misusing data and making false assumptions. The retirement system is far stronger than portrayed.

Read more…

TOPICS: 401(k)IRARetirement Research

2020 Investment Company Fact Book: Letter from the President and CEO

By Paul Schott Stevens

May 13, 2020

This ICI Viewpoints is a version of a letter from ICI President and CEO Paul Schott Stevens that was released in the 60th edition of the Investment Company Fact Book.

Read more…

TOPICS: Financial MarketsFund RegulationGlobalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder

Investing Basics: 529 Savings Plans

By Christina Kilroy

May 7, 2020

One thing you can expect when you’re expecting a baby is to pay a lot for diapers—you might pay about $600 by your child’s first birthday. But the cost of diapers is child’s play compared to the costs that could come later when paying for college. 

To encourage people to save for these education costs, nearly every state and the District of Columbia offer 529 plans, and most offer special tax treatment for savers participating in those plans.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

For Funds' Use of Derivatives, a Promising New Regulatory Framework

By Paul Schott Stevens

April 22, 2020

In a promising new proposal on the use of derivatives, the SEC has consolidated cumbersome regulatory framework into a single, comprehensive rule that is carefully designed to protect investors.

Read more…

TOPICS: Equity InvestingExchange-Traded FundsFund RegulationMoney Market FundsMutual FundShareholder

Regulated Funds: Supporting the Economy During the COVID-19 Crisis

By Paul Schott Stevens

April 22, 2020

In a recent call with the Financial Stability Board, ICI President and CEO Paul Schott Stevens shared some findings and observations about the response of fund investors to recent developments in financial markets, and the picture that has emerged to date is reassuring. The extraordinary actions taken by the Federal Reserve, Treasury, the Securities and Exchange Commission, and Congress helped relieve pressure and ensure orderly functioning of US financial markets.

Read more…

TOPICS: Financial MarketsFinancial Stability

Investing Basics: Tax Benefits to Encourage Saving

By Christina Kilroy

April 14, 2020

To encourage people to save, federal and state governments offer special tax treatment for savings plans for specific goals, such as retirement and education. By increasing the benefit that savers receive in the short term, the government nudges savers to take a positive action that will provide a benefit in the long term.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Investing Basics: The Benefits of Mutual Funds

By Christina Kilroy

March 31, 2020

We’ve reached the halfway point in this series, and we’ve covered a lot of ground: the benefits of investing, how to think about risk, different types of investments, why diversification is important, and dollar-cost averaging. This month’s installment brings all these topics together and examines seven features of mutual funds that make them an enduringly popular investment choice.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Working to Ensure Funds Can Maintain Vital Services

By Paul Schott Stevens

March 22, 2020

Key personnel of mutual fund sponsors and service providers should be deemed “essential workers” and thus should be permitted to report to work to maintain security and services for fund investors. Two key developments over the weekend offered some hope that state governors will hear this message and provide the needed relief from their shelter-in-place orders.

Read more…

TOPICS: CybersecurityFinancial MarketsShareholder

During COVID-19 Crisis, Fund Company Staff Are Essential

By Paul Schott Stevens

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As governments consider extending orders to “shelter in place,” they must include staff of fund companies among the “essential” workers who qualify for an exemption. Fund company staff are very much part of the country’s critical infrastructure, and they must be able to offer their full support to shareholders during these uncertain times.

Read more…

TOPICS: CybersecurityFinancial MarketsShareholder

ETFs Are Passing the COVID-19 Crisis Test

By Shelly Antoniewicz

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How have exchange-traded funds (ETFs) weathered the intensifying financial market fallout from the COVID-19 pandemic? So far, it looks like ETFs are healthy and robust.

Read more…

TOPICS: Equity InvestingExchange-Traded FundsFinancial MarketsFinancial StabilityIndex FundTrading

Mutual Fund Flows in the COVID-19 Crisis

By Sean Collins

March 11, 2020

The novel coronavirus disease, or COVID-19, is taking a heavy toll on the world economy—in lives, in the costs of responding, and in lost production and consumption. Worldwide financial markets reflect this. How are retail investors reacting? Are they panicking, selling out? Or are they staying the course, as during previous financial market epidemics?

Read more…

TOPICS: Bond FundCorporate BondsFinancial StabilityMutual Fund

Investing Basics: Dollar-Cost Averaging

By Christina Kilroy

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Emotions are the enemy of successful investing. For long-term investors, dollar-cost averaging is a smart way to take the emotion out of investing and to eliminate the difficulty and uncertainty of trying to time the market.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

A New Chapter of Growth and Impact: IDC’s 2019 Annual Review

By Thomas Kim

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In a letter in the Independent Directors Council's 2019 Annual Review, IDC Managing Director Thomas Kim discusses the beginning of his role as head of IDC....

Read more…

TOPICS: Fund GovernanceFund RegulationIDC

ICI Continues Its Work on Disclosure Improvements

By Paul Schott Stevens

February 12, 2020

In a letter to the New York Times in response to an article published earlier this month, ICI President and CEO Paul Schott Stevens refutes claims that ICI and the Securities and Exchange Commission (SEC) are seeking to "water down" disclosure requirements....

Read more…

TOPICS: Fund RegulationMutual FundShareholder

ICI Members Are Monitoring the New Coronavirus Outbreak

By Peter Salmon

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TOPICS: GlobalInternationalOperations and Technology

Investing Basics: Diversification

By Christina Kilroy

January 30, 2020

Eggs play a starring role in diversification’s ubiquitous analogy—one we used in the Investing Road Trip©—and for good reason. If you drop a basket holding all your eggs, you’ll be out a lot of eggs. Spreading your eggs across several baskets is a good defense against the risks of exposing all your assets to the same risk.

But perhaps we should also make the point that eggs shouldn’t be the only food in your basket. They may be high in protein, but your body needs a mix of nutrients for good health. Similarly, with investing, a better goal is to build a balanced “diet” of asset classes across industries, geographic areas, and types of securities....

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TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Proxy Proposals Worth Supporting

By Matt Thornton

January 29, 2020

The SEC can save millions of dollars for registered fund shareholders, while maintaining investor protections, by reforming the fund proxy system. The system, which funds use to solicit votes from their shareholders, poses significant challenges and costs to funds and their investors. A new report by the Investment Company Institute points to concrete regulatory actions that would improve the efficiency and cost-effectiveness of the fund proxy system…

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TOPICS: Fund GovernanceMutual FundProxy VotingShareholder

Investing Basics: Types of Investments

By Christina Kilroy

December 23, 2019

Two of the most common investments are stocks and bonds. Chances are if you own a portfolio of investments, those two types of assets make up a significant part—or perhaps all—of it. For those who want to start investing, it’s essential to understand these common portfolio building blocks...

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TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

“A Leader in Every Way”: Amy B. R. Lancellotta

By Dawn Vroegop

December 16, 2019

In a letter that was released in ICI’s 2019 Annual Report to Members, IDC Governing Council Chair Dawn M. Vroegop recalls the tenure of Amy B. R. Lancellotta, the long-serving managing director of IDC, who will retire at the end of this month....

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TOPICS: IDC

Talkin’ ’Bout the Generations: ICI Research on Mutual Fund Ownership by Generation

By Michael Bogdan and Candice Gullett

December 11, 2019

Talk about the differences between generations is a hot topic in today’s cultural conversation. And the Millennial and Baby Boomer generations are in the middle of a little generational warfare. But when it comes to owning mutual funds, are there really that many differences? 

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TOPICS: 401(k)Equity FundEquity InvestingIRAInvestor ResearchMoney Market FundsRetirement ResearchSavings

Investing Basics: What Is Risk?

By Christina Kilroy

November 26, 2019

You invest with the hope of earning a return on your investment. That opportunity invariably involves risk, including the possibility of losing some or all of the money you invested. Understanding these risks is an essential step toward successful investing.

The second installment of the ICI Education Foundation's blog series celebrating its 30th anniversary explores different types of investing risks.

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TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

2019 Annual Report to Members: ICI's International Work

By Miriam Bridges

November 21, 2019

With the industry's interests bound ever more tightly to global trends, ICI pursues an active international agenda through its international arm, ICI Global. ICI’s international work in 2019 was a period of vigorous effort on a host of issues....

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TOPICS: CybersecurityExchange-Traded FundsFinancial MarketsFinancial StabilityGlobalICI GlobalInternationalOperations and TechnologyRetirement Policy

ICYMI: A Q&A with Members of ICI's Retirement Team

November 19, 2019

For this year's 2019 Annual Report to Members, four members of ICI's retirement team sat down to discuss ICI's legislative, regulatory, research, and communications activities to advocate for well-informed public policies that help Americans prepare for retirement....

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TOPICS: 401(k)Fund RegulationGovernment AffairsMutual FundRetirement PolicyRetirement ResearchShareholder

2019 Annual Report to Members: A Letter to ICI's Membership

By George C. W. Gatch and Paul Schott Stevens

November 14, 2019

What follows is an abridged version of a letter by ICI Chairman George C. W. Gatch and ICI President and CEO Paul Schott Stevens that was released in ICI’s 2019 annual report. To read their full letter, please see ICI’s 2019 Annual Report to Members....

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TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder

Closed-End Funds: Opportunities for a True Renaissance

By Dorothy Donohue and Kenneth Fang

November 5, 2019

Closed-end funds are in vogue once again. Legislators, regulators, and fund sponsors are turning to the structure as a promising vehicle for retail investment and capital formation. And recent government actions are positive steps that can lead to a deeper pool of closed-end funds. With a few critical tweaks, this legislation and related regulatory action could stimulate further growth and better deliver on that promise....

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TOPICS: Equity FundFund RegulationShareholder

Investing Basics: What Is Investing?

By Christina Kilroy

October 31, 2019

This month, the ICI Education Foundation celebrates 30 years of developing, delivering, and promoting investor education. As part of our yearlong celebration, we will be sharing an ICI Viewpoints post each month that explains a basic concept of investing, drawn from the ICI Education Foundation’s Investing Road Trip.

Read more…

TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder

Five Key Points on 401(k) Plan Fees from ICI Research

By James Duvall and Steven Bass

October 23, 2019

Thanks to innovation and a competitive market, 401(k) mutual fund fees keep falling. ICI has a window into this information through our study of the cost of providing 401(k)s, in which we take a close look at the expenses and fees of mutual funds incurred by 401(k) plan investors, and in related research on fund fees through a collaborative research effort between ICI and BrightScope.

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TOPICS: 401(k)Equity InvestingMutual FundRetirement ResearchShareholder

The ETF Rule: Paving the Way for Further Growth and Success

By Jane Heinrichs

October 10, 2019

For tens of millions of Americans, mutual funds and exchange-traded funds (ETFs) are the most convenient, cost-effective, transparent, and well-regulated tools available to meet their important financial goals. Both investment vehicles are governed by the Investment Company Act of 1940, but ETFs have long needed their own set of uniform regulations under the Act. 

The SEC rightly recognized this by recently adopting Rule 6c-11—otherwise known as “the ETF rule.” The SEC’s rule is the next step in the evolution of ETFs and will foster greater transparency, innovation, and competition, enabling more investors to realize their benefits.

Read more…

TOPICS: Exchange-Traded FundsFund Regulation

Operations Managers Identify Technology as Key to Future Success

By Ahmed Elghazaly

September 24, 2019

How are asset managers investing in the future? To help answer this question, Accenture conducted a joint study with ICI and released a report highlighting the growing importance of technology to successfully navigate the changing tides in the asset management industry. Whether it’s the cloud, data management, artificial intelligence, or robotic process automation, the study found that the right technology is key to gaining and maintaining an edge in the years ahead.

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TOPICS: Operations and Technology

Celebrating 15 Years: Join IDC for a Special Fund Directors Conference in October

By Amy B. R. Lancellotta

September 24, 2019

IDC’s Fund Directors Conference is always an important event for the fund director community, but this year’s gathering will take on special meaning. On October 21–23 in Chicago, we’ll mark 15 years of supporting fund directors’ work on behalf of fund shareholders—by taking stock of how fund governance has evolved, surveying today’s industry and regulatory landscape, and contemplating the road ahead.

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TOPICS: Fund GovernanceIDC

Four Wrongs Don’t Make a Right—A Financial Stability Proposal Falls Short

By Susan Olson

September 16, 2019

After the global financial crisis, the Dodd-Frank Act of 2010 set up a regulatory framework to identify and mitigate threats to financial stability. Since then, regulators and industry have taken many actions to make financial markets and market participants more resilient. Yet a new proposal calling for further reform fails to take this progress into account, instead offering an action plan that’s likely to create—not solve—problems in promoting financial stability. 

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TOPICS: Financial MarketsFinancial StabilityFund Regulation

Happy Birthday, IRA! Congratulations on 45 Years

By Sarah Holden and Elena Barone Chism

September 12, 2019

Labor Day 2019 marked the 45th birthday of the individual retirement account (IRA). When the Employee Retirement Income Security Act was signed into law on September 2, 1974, it introduced bold steps to safeguard Americans’ employer-sponsored pensions and created the IRA.

Forty-five years later, IRAs are a significant component of US households’ retirement assets, holding $9.4 trillion in assets, or about one-third of the total US retirement market, at the end of March 2019…

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TOPICS: IRAInvestor ResearchMutual FundRetirement ResearchSavingsShareholder

Three Bs or Not Three Bs: Revisiting Claims That Investment Grade Corporate Bond Funds Pose Financial Stability Risks

By Shelly Antoniewicz, Sean Collins, Rachel Graham, and Christof Stahel

September 9, 2019

In the past year, regulators have expressed concerns that regulated funds with a mandate to invest in investment grade corporate bonds might pose risks to financial stability. A case in point is the Bank for International Settlements’ (BIS) March 2019 Quarterly Review. The only way that the BIS can conclude that downgrades could fuel “fire sales” in “excess of daily turnover in corporate bond markets” is to assume that all market participants would quickly sell downgraded bonds. But the BIS headlines and charts focus solely on mutual funds....

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TOPICS: Bond FundCorporate BondsFinancial StabilityMutual Fund

30 Tips to Celebrate 30 Years of Investor Education

By Christina Kilroy

September 3, 2019

For 30 years, the ICI Education Foundation has pursued its mission to advance investor education by developing, delivering, and promoting investor education to diverse audiences across a range of ages and life stages. As we kick off our celebration of the foundation’s 30th anniversary in October, we will be sharing tips for successful investing on our social media accounts over the coming weeks....

Read more…

TOPICS: 401(k)IRAInvestment EducationMutual FundSavingsTaxes

Critics Claim Retirement Savers Aren’t Behaving Rationally. The Data Say They Are.

By Peter Brady

August 22, 2019

In a letter to MarketWatch responding to “Opinion: This Recent Report Suggests Steady Saving for Retirement Is Not Important,” published August 14, ICI Senior Economic Adviser Peter Brady refutes claims that criticize ICI’s recent retirement research, noting that more people benefit from employer plans than is commonly understood….

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TOPICS: 401(k)IRARetirement PolicyRetirement Research

IRA Investors Are Concentrated in Lower-Cost Mutual Funds

By James Duvall

August 20, 2019

Individual retirement accounts (IRAs) represent the largest share of assets in the US retirement market, with assets totaling $8.7 trillion at year-end 2018. Forty-six percent of this total is held in mutual funds, with IRA mutual fund investors primarily invested in equity funds. As part of ICI’s ongoing efforts to shed light on important insights into IRA investing, ICI is updating its analysis of expense ratios that investors pay on mutual funds in their IRAs....

Read more…

TOPICS: 401(k)Bond FundEquity InvestingIRAMutual FundRetirement ResearchShareholder

Mind the Gap

By Sarah Holden and Christina Kilroy

July 22, 2019

It’s a good idea to “mind the gap” if you’re traveling on the Tube in London, taking Amtrak in the United States, or riding Metro in Paris or Washington, DC. Being mindful of the space between where you are and where you’re going is important—not only when navigating public transit, but also when saving for retirement. Saving for retirement is a career-long process, with many decisions along the way....

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TOPICS: 401(k)IRAInvestment EducationMutual FundRetirement ResearchSavingsShareholderTaxes

Alibaba’s Joseph C. Tsai in Conversation with Paul Schott Stevens

By Lauri Bearce

June 24, 2019

The world’s two largest economies, the United States and China, need to collaborate on technological innovation to do good for society and to have global impact, Joseph Tsai, Alibaba Group cofounder and executive vice chairman, said at ICI’s 61st General Membership Meeting.

Read more…

TOPICS: GMMGlobalInternational

Global Leaders Discuss Building a Competitive European Union

By Jean-Claire Perini

June 12, 2019

EU policymakers need to have a global mindset if the European Union is to compete and thrive in today’s interconnected marketplace. That’s according to an informative panel at ICI’s 2019 General Membership Meeting in Washington, DC, featuring ICI President and CEO Paul Schott Stevens, Honorary Director General of the European Fund and Asset Management Association (EFAMA) Peter De Proft, and former Secretary General of the International Organization of Securities Commissions David Wright....

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TOPICS: GMMICI GlobalInternational

Fund Industry Leaders Encourage Cultural Stability and Willingness to Embrace Change

By Olivia Caverly

May 31, 2019

The mutual fund industry is being driven by change. At this year's General Membership Meeting, the panel “Facing the Future: Leadership Perspectives" highlighted why firms should be encouraging a positive workplace culture, which will enable them to embrace the fast pace of industry change....

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TOPICS: GMMOperations and Technology

Parag Khanna Talks Asia at ICI’s GMM

By Miriam Bridges

May 30, 2019

How can powerful nations continue to thrive? By being more connected to Asia, said Parag Khanna, the founder and managing partner of the advisory firm FutureMap. The noted global strategist and author shared this argument and more from his latest book, The Future Is Asian, with the guests at ICI’s 61st General Membership Meeting in Washington, DC, highlighting that Asia is becoming an ever-more important destination for investment....

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TOPICS: GMMICI GlobalInternational

In Marketing, Either Adapt or Fall Behind

By Rob Elson

May 30, 2019

Seasoned marketing professionals took to the main stage at ICI’s General Membership Meeting to survey the modern business landscape and unpack strategies for reaching and retaining customers in a digital, data-driven world. Drawing on their unique perspectives, BlackRock’s Frank Cooper III, Salesforce’s Simon Mulcahy, and Nuveen’s Martha “Marty” Willis each shared sharp insights on how the business-to-customer relationship is changing—and on what companies must do to keep ahead of the curve....

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TOPICS: GMM

It’s 5/29—Are You Taking Full Advantage of College Savings Opportunities?

By Sarah Holden and Christina Kilroy

May 29, 2019

Saving for an education is an important financial goal for millions of US households. In fact, nearly one-quarter of mutual fund–owning households indicate saving for educational expenses is one of their goals for their mutual fund investments. An increasingly popular way to save for college is through 529 plans, named for the section of the tax code that provides for their favorable tax treatment....

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TOPICS: Investment EducationSavingsTaxes

2019 Investment Company Fact Book: Letter from the Chief Economist

By Sean Collins

May 7, 2019

Globalization has hit a few speed bumps in recent years, but it hasn't slowed the globalization of the Investment Company Fact Book. Consistent with ICI’s mission to represent the interests of regulated funds and their investors worldwide, Fact Book is expanding its international presence....

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TOPICS: Financial MarketsFund RegulationGlobalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder

SEC Chairman Jay Clayton Tackles Hot Topics at GMM

By Garrett Hawkins

May 2, 2019

In introducing SEC Chairman Jay Clayton ahead of his highly anticipated appearance at ICI’s 61st annual General Membership Meeting this morning, ICI President and CEO Paul Schott Stevens praised the chairman’s “erudition, dedication, and acumen” in leading the Commission. And during their 40-minute conversation—which tackled some of the top issues facing funds and their investors—each of those qualities was on show.

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TOPICS: Financial MarketsFund RegulationGMM

ICI’s Quarterly Retirement Market Resource

By Miriam Bridges

April 23, 2019

ICI publishes statistics on the US retirement market every quarter as an information resource for mutual funds, individual investors, the media, policymakers, and researchers. This report includes individual retirement account (IRA) and defined contribution (DC) plan assets, including 401(k) plans, and mutual fund assets held in retirement accounts....

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TOPICS: 401(k)IRAMutual FundRetirement ResearchSavings

Don’t Forget the 401(k): America’s Retirement System Helps Workers Save and Preserve Assets

By Paul Schott Stevens

February 26, 2019

In a letter to the Wall Street Journal responding to “Forget the 401(k),” published February 11, ICI President and CEO Paul Schott Stevens shows how the US retirement system actively engages employers to promote workers' retirement saving, noting that the current system also preserves choice and control of investments....

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TOPICS: 401(k)Retirement PolicyRetirement Research

IRA: Will You Be Mine?

By Sarah Holden

February 12, 2019

As this Valentine’s Day approaches, step back and consider treating yourself or your spouse to an individual retirement account (IRA) contribution. Saving for retirement is an important household financial goal and contributing to an IRA is a good step toward providing for those later years....

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TOPICS: IRARetirement Research

From December Outflows to January Inflows: Seasonal Factors in Mutual Fund Flows

By Shelly Antoniewicz and Morris Mitler

February 4, 2019

As US and global stock markets churned in December, the press took note of ICI’s reports on outflows from US long-term mutual funds and drew a hasty conclusion: individual fund investors were fleeing from market turmoil. But weighing flows against total assets is the first step to putting fund flows in context. A second factor to be considered is the calendar. It turns out that mutual fund flows have a distinct seasonal pattern, with stronger inflows early in the year giving way to weaker inflows or outflows during the second half.

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TOPICS: Bond FundEquity FundMutual Fund

A Year of Advocacy: IDC’s 2018 Annual Review

Amy B. R. Lancellotta

January 31, 2019

IDC is well known for its education and outreach programs—and it’s not hard to see why. Year after year, they provide fund directors with opportunities to hone their craft and connect with one another, equipping them with the tools they need to thrive in their oversight role for the benefit of fund shareholders....

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TOPICS: Fund GovernanceFund RegulationIDC

Corporate and Investment Grade Bond Funds: What’s in a Name?

By Sean Collins

January 4, 2019

Financial stability concerns are being inflated by confusion over what the funds in question actually hold. In fact, these funds invest nearly half their assets in Treasury and agency securities, and less than one-third in corporate bonds. In other words, these funds hold more in government bonds—traditionally the “safe haven” that investors seek in times of turmoil—than in the corporate bonds that seem to cause the regulators’ angst....

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TOPICS: Bond FundCorporate BondsFinancial StabilityMutual Fund

Even in Bear Markets, Equity Fund Investors Stay the Course

By Shelly Antoniewicz

December 21, 2018

With the S&P 500 on a downward trajectory since early October, we’ve seen many headlines in the financial press of an impending bear market in US stocks and the potential for retrenchment by investors. But just as we showed that bond investors aren’t stampeding the exits in another recent ICI Viewpoints, “Debunking Assumptions About Bond Mutual Funds’ Flows and Bond Sales,” equity fund investors’ reactions to substantial declines in stock prices are less dramatic than the popular belief would suggest....

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TOPICS: Equity InvestingExchange-Traded FundsMutual Fund

Debunking Assumptions About Bond Mutual Funds’ Flows and Bond Sales

By Shelly Antoniewicz

December 20, 2018

Recent outflows from bond mutual funds have drawn press attention and revived concerns among regulators about the impact of bond fund investors’ actions on the broader bond market. Unfortunately, this attention is rooted in misconceptions—as we’ll show using ICI’s comprehensive data covering 98 percent of mutual fund industry assets.

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TOPICS: Bond FundBondsFixed IncomeMutual Fund

Understanding Interest Rate Risk in Bond Funds

By Shelly Antoniewicz and James Duvall

December 17, 2018

Long-term interest rates reached their lowest recorded levels in July 2016 and were on a steady upward trend until early December. Rates dipped recently, but that could be short-lived if global trade tensions ease and the outlook for economic growth remains robust. Investors should be aware of the effects rising interest rates could have on their bond fund investments....

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TOPICS: Bond FundBondsExchange-Traded FundsFixed IncomeIndex FundMutual Fund

Mutual Funds: Rated E for Everyone

By Sarah Holden

December 12, 2018

Investing is subject to many misconceptions, including the notion that only wealthy households own mutual funds. As US households’ ownership of mutual funds has grown over the past four decades, the need to correct myths about who owns mutual funds has also grown....

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TOPICS: Investor ResearchMutual FundRetirement PolicySavingsShareholder

ICI’s 2018 Annual Report: Letter from the President

By Paul Schott Stevens

December 3, 2018

A version of this letter by ICI President and CEO Paul Schott Stevens was released in the Institute’s 2018 Annual Report.

Fund industry watchers will remember this year as one of important policy developments, including some that have been the subject of years of debate. The Investment Company Institute has been deeply engaged in this wide range of issues, working on both legislative and regulatory fronts to promote advantageous outcomes for regulated funds and their shareholders....

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TOPICS: Exchange-Traded FundsFinancial MarketsFund RegulationGlobalIDCOperations and TechnologyRetirement Policy

Common Ownership: "Puffery" in the Legal Analysis

By Mike McNamee

December 3, 2018

Proponents of the common ownership hypothesis presume that the economic debate over the competitive effects of institutional investing is settled. But a new paper from Douglas H. Ginsburg, judge on the US Circuit Court of Appeals for the District of Columbia Circuit, and Keith Klovers, a judicial clerk on that court, finds that those proponents "substantially overstate the validity and strength of the existing empirical work" on common ownership....

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TOPICS: Financial MarketsFund RegulationPolicy ResearchShareholder

Growing Better with Age: The 401(k) Turns Forty

By Miriam Bridges and Christina Kilroy

November 30, 2018

This month marks the fortieth birthday of the most prevalent retirement plan available to workers today: the 401(k). It’s a milestone, to be sure, but there are no mid-life doldrums here—401(k) plans continue to grow, and currently hold $5.3 trillion in assets on behalf of more than 55 million active participants and millions of former employees and retirees.

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TOPICS: 401(k)Investor ResearchPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholderTarget Date Funds

Common Ownership: Ignoring the Age-Old Conflict Between Owners and Managers

By Mike McNamee

November 30, 2018

In his first public remarks as a member of the Federal Trade Commission, Commissioner Noah Joshua Phillips tackled what he called “the common ownership story”—and concluded that “this ‘economic blockbuster’ seems a little light on plot.” And like many other experts, Commissioner Phillips sees problems with both the empirical evidence and the theoretical basis for the claim of anticompetitive harm....

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TOPICS: Financial MarketsFund RegulationPolicy ResearchShareholder

Common Ownership: Faulty Assumptions on Investors’ ‘Economic Interests’

By Mike McNamee

November 29, 2018

In a new paper, scholars Thomas A. Lambert and Michael E. Sykuta find that proponents of the common ownership hypothesis don’t understand—or even attempt to consider—the actual economic interests and incentives of asset managers and their fund clients....

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TOPICS: Financial MarketsFund RegulationPolicy ResearchShareholder

Funds and Proxy Voting: Funds Vote Thoughtfully and Independently

By Morris Mitler, Sean Collins, and Dorothy Donohue

November 7, 2018

During the 2017 proxy voting season, registered investment companies—including mutual funds, exchange-traded funds (ETFs), and closed-end funds—cast more than 7.6 million votes for proxy proposals submitted by either management or shareholders of corporations held in the funds’ portfolios. Some of those proposals were straightforward; others were more controversial. But in every case, a fund adviser had a duty to evaluate the proposal and act in the best interest of the fund and its shareholders.

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TOPICS: Mutual FundProxy VotingShareholder

Funds and Proxy Voting: Who Submits Shareholder Proposals?

By Morris Mitler, Sean Collins, and Dorothy Donohue

November 6, 2018

Any registered fund that holds companies’ stocks in its portfolio has a duty to consider proxy proposals offered by those companies—and to act in the best interests of the fund and its shareholders. These funds also have a regulatory obligation to report those votes.

As the only investors required to disclose their votes publicly, funds draw an outsized share of the attention focused on proxy issues and voting outcomes. And critics frequently focus on whether they agree or disagree with funds’ votes—without regard to funds’ obligation to vote in the interests of fund shareholders....

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TOPICS: Mutual FundProxy VotingShareholder

Funds and Proxy Voting: The Mix of Proposals Matters

By Morris Mitler, Sean Collins, and Dorothy Donohue

November 5, 2018

Proxy voting is in the news and on the minds of policymakers, corporate executives, and investors. The Securities and Exchange Commission (SEC) will focus on a number of issues related to proxy advisory firms, shareholder proposals, and technology and innovation to make the proxy process more efficient at a staff roundtable on November 15. Major corporate issuers—organized as the “Main Street Investors Coalition”—are agitating against the voting practices of institutional investors, including registered funds....

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TOPICS: Mutual FundProxy VotingShareholder

Fund Shareholders Have to Receive Reports. They Don’t Have to Pay So Much for Them

By Paul Schott Stevens

November 1, 2018

ICI has filed a comment letter calling on the Securities and Exchange Commission (SEC) to overhaul the framework for fees that funds are required to pay to vendors when intermediaries such as broker-dealers hire those vendors to distribute legally required reports and disclosures to shareholders. The issue may sound dry and technical—but if the SEC follows through on our recommendations, shareholders will save real money.

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TOPICS: Mutual FundShareholder

Improving Operational Efficiency for Interval Funds

By Jeffrey Naylor

October 23, 2018

Fund firms that offer interval funds—a type of closed-end fund that periodically offers to repurchase a portion of its shares—face unique operational challenges. To address these, ICI’s Broker-Dealer Advisory Committee recently launched the Working Group on Interval Funds. The working group plans to publish a comprehensive white paper that will consider new approaches to boosting the operational cohesiveness and efficiency of trade processing for these funds. The paper will include pertinent recommendations that should greatly benefit interval fund investors....

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TOPICS: Operations and Technology

28 Trillion Smart Decisions

By Christina Kilroy

October 22, 2018

Have you ever done one small, smart thing that ended up making a huge difference in your future? I’m not talking about blind luck—like buying a ticket that turns out to be the winner in the (currently) $1.6 billion Mega Millions. No, I’m talking about small, smart decisions that can materially affect us later in life....

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TOPICS: Investment EducationMutual FundRetirement ResearchSavingsShareholderTaxes

SEC Should Reject Complex, Costly “Pass-Through” Proxy Voting

By Paul Schott Stevens

October 2, 2018

Policymakers and regulators at the US Securities and Exchange Commission (SEC) have renewed their interest in proxy voting issues recently. Among the items under discussion at an upcoming SEC Roundtable is the idea that a fund would only be allowed to vote on portfolio company proxies after the fund asks its own shareholders how the fund should vote. In essence, this would “pass through” to fund shareholders the decision of how corporate proxies would be exercised. Even the briefest consideration demonstrates how misguided and impractical the idea is—and why it should go no further.

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TOPICS: Fund GovernanceFund RegulationProxy VotingShareholder

Fund Adviser Proxy Votes Align with Fund Interests

By Paul Schott Stevens

September 24, 2018

A key assertion in “Cracking the Proxy Racket” (The Wall Street Journal's Review & Outlook, September 18) is that asset managers vote “in block” to support recommendations set forth by advisory firms like Glass Lewis and Institutional Shareholder Services. Such statements ought to be tested against actual data.

A decade’s worth of research shows that fund advisers vote proxies diligently, in line with their fiduciary duty to the fund and its shareholders...

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TOPICS: Fund GovernanceFund RegulationIndex FundMutual FundProxy VotingShareholder

Stock Ownership in the United States: It’s Main Street

By Sarah Holden

September 10, 2018

US household activity in the stock market has undergone a transformation over the past three decades. The old idea that investing in the stock market is just for the wealthy is vastly out of date. 

In the late 1980s, less than a third of US households held stocks. Now, a majority do. This growth in stock-owning households has occurred across all income quintiles....

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TOPICS: Equity InvestingInvestor ResearchRetirement PolicySavingsShareholder

“Common Ownership” Hypothesis Is Unconvincing

By Sean Collins and Susan M. Olson

August 22, 2018

Economists and legal scholars have issued pointed critiques and empirical rebuttals of the “common ownership” hypothesis—the notion that institutional investors holding small, non-controlling stakes in competing companies in concentrated industries decrease competition and raise consumer prices. Yet the issue continues to draw attention and is one of a long list of topics that the Federal Trade Commission (FTC) will include in upcoming hearings on competition and consumer protection.

In response, the Investment Company Institute (ICI) has submitted a comment letter to the FTC to provide a factual baseline on key elements of the discussion to help dispel misrepresentations underlying the common ownership hypothesis.

Read more…

TOPICS: Fund RegulationPolicy ResearchShareholder

IRA Investors Are Concentrated in Lower-Cost Mutual Funds

By James Duvall

August 8, 2018

Individual retirement accounts (IRAs) represent the largest share of assets in the US retirement market, with assets totaling $9.2 trillion at year-end 2017. Forty-seven percent of this total is held in mutual funds, with IRA mutual fund investors primarily invested in equity funds. As part of ICI’s ongoing efforts to shed light on important insights into IRA investing, ICI is offering an updated analysis of expense ratios that investors pay on mutual funds in their IRAs....

Read more…

TOPICS: 401(k)Bond FundEquity InvestingIRAMutual FundRetirement ResearchShareholder

How Mutual Funds Service and Protect Shareholders Affected by Disaster

By Joanne Kane

June 26, 2018

Mutual fund shareholders were among the millions of people affected by the numerous natural disasters that affected the United States during 2017. The recent volcanic event in Hawaii is another reminder that disasters—natural or manmade—can strike anytime, anywhere.

As both the summer tornado season and hurricane season get underway, the destruction in Hawaii serve as a reminder that US residents should be prepared for the unexpected—just as mutual funds are prepared to help and protect shareholders affected by disaster....

Read more…

TOPICS: Operations and Technology

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