Overtaking Mutual Funds: The Hidden Rise and Risk of Collective Investment Trusts

By Natalya Shnitser November 9, 2023 by renholding

The retirement security of millions of American workers is increasingly tied to an investment vehicle that most have never heard of, and whose dramatic growth over the last 40 years has received almost no regulatory or academic scrutiny.

With nearly …

Should We Worry About Robo-Voting?

By John G. Matsusaka and Chong Shu October 10, 2023 by renholding

Robo-voting occurs when an investment fund mechanically follows the voting recommendations of its proxy adviser in corporate elections. The practice has become easier for funds with the development of online voting platforms that a proxy adviser can complete in advance …

Are Actively Managed Mutual Funds Betting on the CEO?

By Utpal Bhattacharya, Yuet Ning Chau and Kasper Meisner Nielsen August 22, 2023 by renholding

Actively managed mutual funds invest with the goal of outperforming a benchmark index or achieving an investment objective. Many academic studies focus on whether mutual funds outperform benchmark returns and debate whether abnormal returns can be attributed to skill or …

How to Restore Shareholder Agency With Pass-Through Voting

By Georgia Stewart August 11, 2023 by renholding

Sign up for an investment account, and you will likely be presented with a dizzying range of investment products. The industry caters to investors with different risk appetites, savings pots, time horizons, ESG outlooks, religious commitments, and more. In some …

Why Markets Need More Information to Properly Monitor Banks

By Alireza Gharagozlou June 21, 2023 by renholding

Substantively, banks are pooled investment funds, like mutual funds, exchange traded funds, and so on: They take people’s money and use it to buy financial assets. There is one crucial difference, however. In those other funds, losses are immediately passed …

Do Bonds Affect Equity Monitoring?

By Todd A. Gormley and Manish Jha April 12, 2023 by renholding

As institutional investors grow in size and influence, questions arise as to whether they are effective stewards for equity investors. That the three mutual fund families with the most total net assets each holds equity positions in around 5,000 U.S. …

How Mutual Funds Change Benchmarks to Manipulate Performance

By Kevin Mullally and Andrea Rossi August 29, 2022 by renholding

Investors allocate capital to mutual funds based on past performance and the perception of whether a fund can “beat the market.” In fact, mutual fund companies explicitly promote their funds based on these factors, knowing that investors will respond. The …

The New Corporate Governance

By Oliver Hart and Luigi Zingales August 10, 2022 by renholding

In the last few years, there has been a dramatic increase in shareholder engagement on environmental and social issues. Consider two examples from 2021. Eighty-one percent of DuPont shareholders approved a proposal requiring the company to disclose how much plastic …

SEC Director of Investment Management Speaks at PLI

By William A. Birdthistle July 27, 2022 by renholding

Good afternoon. Thank you, Paulita and Rajib, for your gracious invitation and kind welcome to this year’s program on current issues and trends in Investment Management.[1] As I suspect many of you know – and as the spring regulatory …

Deep Learning Mutual-Fund Risk Assessment and Performance

By Sean Cao, Baozhong Yang and Alan L. Zhang April 29, 2022 by renholding

The ripple effects of the COVID-19 pandemic have increased market volatility and even caused markets to close in some countries. These fluctuations substantially affected mutual funds, leading to fire sales of their assets and SEC scrutiny of their risk management. …

Does SEC Scrutiny Improve Mutual Fund Disclosures?

By Kai Du and Shuyang Wang January 5, 2022 by renholding

Millions of investors rely on the disclosures of U.S. registered mutual funds in making their investment decisions, but some of the most influential industry opinion leaders and legal scholars have criticized the quality of those disclosures. Like public companies, mutual …

ISS Discusses Increase in Fund Flows for 2021

By Christopher Davis January 4, 2022 by renholding

Back to normal doesn’t mean what it used to. Following a year like no other, demand came roaring out the gate in 2021. While the pace of new demand has slowed somewhat in recent months amidst concern of new COVID

…

Do Investors Pay Less Attention to Women Fund Managers?

By P. Raghavendra Rau and Jinhua Wang October 12, 2021 by renholding

It is well-documented that relatively few women manage investment funds. In 2019, for example, women accounted for 37.5 percent of all lawyers, 49 percent of judges, 34.5 percent of economists, 19 percent of surgeons, and 26 percent of chief executives, …

Sullivan & Cromwell Discusses SEC Proposal to Enhance Proxy Voting Disclosure by Investment Funds

By Donald R. Crawshaw, Eric M. Diamond, Joseph A. Hearn, Sarah P. Payne and Marc Trevino October 11, 2021 by benzonenshayn

On September 29, 2021, the SEC issued a proposed rulemaking to enhance the information mutual funds, exchange-traded funds and other registered management investment companies (“funds”) report annually about their proxy votes. The proposal also would require so-called “institutional investment managers” …

Common Ownership: Solutions in Search of a Problem

By Keith Klovers and Douglas H. Ginsburg August 25, 2021 by renholding

Mutual funds and exchange-traded funds are the cornerstone of many Americans’ investment and retirement plans. (For simplicity, we refer to all these investments as “mutual funds.”) Collectively, investment companies such as BlackRock, Fidelity, State Street, and Vanguard hold more than …

Moving Beyond Mutual Funds

By Shawn Bayern August 13, 2021 by renholding

As has become widely known in the past few years, the mutual-fund industry is more concentrated than ever, especially because of the growing use of index funds. Whether this is a problem and how to respond have been the topics …

Hiding in Plain Sight: The Global Implications of Manager Disclosure

By Michael Young, Richard B. Evans, Miguel A. Ferreira and Pedro Matos July 8, 2021 by renholding

Delegated asset management, and mutual funds in particular, have become the investment vehicle of choice for retail investors in capital markets worldwide. At the end of 2020, open-end mutual funds had a total of $63 trillion in assets under management …

“Public” Mutual Funds

By Jeff Schwartz April 29, 2021 by renholding

The Big 3 mutual-fund managers (BlackRock, State Street, and Vanguard) have amassed incredibly large public-company holdings through the array of mutual funds they oversee. As a result, they now play a pivotal role in corporate governance in many of the …

Passive Exit

By Joshua Mitts January 6, 2021 by renholding

Economist Albert O. Hirschman (1970) classically set out the two alternatives facing dissatisfied members of an organization: They can voice displeasure or exit for greener pastures. Hirschman’s model has long explained the tradeoff facing shareholders of a poorly governed firm: …

Pandemic Disclosures: Covid-19 as a “Current Market Condition” for Mutual Funds

By Anne M. Tucker, Yusen Xia and Susan Navarro Smelcer January 5, 2021 by renholding

What constitutes a “current market condition” that mutual funds are required by SEC regulations to disclose? Current market condition risks arise because of changing market conditions that can affect investment performance. For some U.S.-registered funds, Covid-19 is prompting …

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