This report offers some suggestions directed at how quality of service can be improved in the mutual fund industry, how competition can be made more effective and thereby the results for customers as well as successful fund managers improved. It does this by firstly conducting a broad narrative analysis of the many issues which have affected the industry in the past and which still affect it. It then makes a series of policy recommendations setting out what each party involved can do to contribute to better overall outcomes.
How does this market work, and as importantly, in what ways is it not working as well as it could? What are the reasons for this? What is its history, and structure? To what extent is the power of consumer choice the driver of services delivered? Where this is lacking, what are the fundamental reasons for this? What is the effect, both good and bad, of current regulation? What is the range of business structures used and what is their history? Why is it important for fund managers to be able to trust their clients? What should investors look for in a fund manager’s description of themselves? How, and by whom, can consumer understanding of “what active management actually is” be best maintained?
These are some of the questions dealt with in this wide-ranging, narrative, non-technical and discursive report which also makes a series of policy recommendations in the following areas:
- That open debate on the merits of different business structures is needed.
- Why and how funds should improve the way they communicate with their investors, and the gains for all parties that can be made from doing so.
- Why it is crucial for the consumer to understand the basic choice they must make between passive and active management, why current regulation actively confuses this choice, and how the regulatory approach should be modified.
- What the consumer should look for when they choose an active fund.
- What the regulator, state or otherwise, should and should not be doing to help.