What's Wrong with the Fund Industry
Some cracks are emerging in the fund-industry foundation.
The mutual fund industry has long prided itself in staying free of the scandals that have plagued other types of investment vehicles, such as limited partnerships and the less-savory corners of the insurance arena. Any mutual fund executive (or the fund industry trade group, the Investment Company Institute), will gladly tell you about the industry's long history of serving investors and offering products that meet market needs.
But with corporate America and Wall Street under increasing scrutiny, the fund industry has also been under attack. As Morningstar managing director Don Phillips pointed out in a recent article in our monthly newsletter, Morningstar FundInvestor, the fund industry should be doing everything possible to align its interest with those of shareholders, particularly now that investors have been scarred by a three-year bear market and high-profile corporate scandals. But instead, the industry has continued to dig in its heels on key issues such as disclosure of proxy voting (a battle it ultimately lost).