Seeing Is Believing
The fund industry, more than most, lends itself to evidence. Some company promises that it builds the best custom houses, or gives the best haircuts, or delivers the best temporary employees. Who is to know? In contrast, thanks to the Securities Act of 1940 and to the fact that it offers off-the-shelf, easily measured products, the fund industry’s assurances can readily be checked. One vendor’s claims may be compared with another’s. With fund sales, there shouldn’t be much room for blandishments.
Historically, though, funds have been moved largely through storytelling. Yes, the tales of a fund’s superiority were typically--although not always--attached to performance figures, but the results were rarely generated over enough time, with a sufficiently large margin of success, to be anything more than suggestive. Launch a new fund, beat the competition for a few years, proclaim loudly why that success will continue, collect incoming assets. Such has been the fund industry, for almost all of its existence.