Unlocking Real Value Blog

AK In The News: Mutual Fund Industry’s Top Challenge

Today’s Ignites (A Financial Times Service) highlights the results of their poll on the top challenges facing the mutual fund industry today. Respondents were given five choices to select from. The results on the top challenge were as follows:

  • Market volatility and economic uncertainty (43%)
  • Competition from ETFs (21%)
  • The proposed money market reforms (16%)
  • Tougher scrutiny by SEC, Finra (8%)
  • Encouraging flows into equity products (6%)

I was a little surprised by these results, as in my mind I have the top two answers reversed – with ETFs being the biggest threat. Interestingly, a similar poll done in February of last year indicated that 45% of respondents chose ETFs as the biggest threat, making it the most popular choice. (That poll did not include the economic uncertainty option.)

My thoughts on the results, as indicated and quoted in the article are:

“”Long-term, of course, economic uncertainty always will be a factor. But this uncertainty impacts all types of investments, not just mutual funds,” Klausner says. Competition from ETFs represents a more daunting challenge to the mutual fund industry than economic uncertainty because it is a specific, rather than a generalized threat, according to Klausner.

“Given the ongoing press about the underperformance of active management, I would think that ETFs, most of which are managed passively, would continue to be a large threat to mutual funds. This comes in conjunction with the growth of ETFs and the increase in the number and type of ETFs available: sector, industry, commodity, et ceterara,” he says.”

What do you think?

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