Mutual Funds
Of all the types of investment companies are most popular mutual funds. In 1993, the total number of mutual funds stood at 4558, and their assets reached $ 2011 billion, private investment companies was 512, while their assets equaled $ 124 billion They are similar to our mutual funds that redeem its own shares and that the value of shares is determined on the basis of net assets. However, they are fundamentally different from Russian mutual funds because they are joint-stock companies. Shareholders are entitled to vote on matters relating to the choice of the board of directors, approval for the investment policy and approval of contract with the manager. According to the law in 1940 to the Board of Directors shall consist of at least 40% of directors who are not managers of the company (outside directors). Direct management of the Fund is vested in the manager - legal or natural person who receives for their services fee, which usually depends on the net asset value fund. Typically, the fund manager is the founder. Compensation managers must be stated in the prospectus and is 0.25 - 3% of net assets (usually 0,5-1%). Remuneration of the administrator is the main part of costs of the fund. The relationship with the manager based on a contract which is subject to annual approval by the Board of Directors and general shareholders' meeting. Manager can manage several funds - in this case speak of "family" or group of funds. The table in The Wall Street Journal, all funds are the names of management companies in alphabetical order: "Dean Uitter" - 15 funds, "Merrill Lynch" - 30 funds, etc. At the end of 1993, 67% of assets mutual funds were managed by only 25 companies. In order to attract as much capital, a management company is trying to create a fund of all possible preferences. The choice of the investor depends on his preferences varying degrees of profitability, safety and liquidity. The higher the yield, the lower the reliability. Different preferences satisfy different types of securities. That is why mutual funds are divided, depending on the type of securities in which they invest. For example, highly reliable, but are low-income stock funds investing in money market instruments (government bonds, currency, etc.). Risky but profitable - stock funds, to invest in the securities of the young growing companies. Much of the success of the fund depends on the manager. The most effective managers in the United States and around the world include John Templeton (John Templeton) and George Soros (George Soros). Under the direction of the latter are the funds, the total value of assets which in 1994 reached 11 billion dollars, for 1990 - 1994 biennium. average annual rate of return was 40%. Typically, the manager is evaluated by comparing the dynamics of the Fund's assets to any stock index, such as Standard & Poors 500. Index - this is, roughly speaking, the assessment of the stock market, which is calculated on the basis of the cost of the most popular shares, traded on the market. If their value is growing, it grows and the index. If the drops - the index also decreases. As practice shows, "outflank" the market in the long run it is very difficult, so at the present time, most managers use the tactic of passive investment (invest in an index). In other words, the Fund's assets invested in those securities, which are used to calculate the index. When adding or disappearance of any shares of the stock index portfolio adjusted. This method significantly reduces the costs of portfolio management. As a result, the popularity of the funds, indexed by the index has risen significantly. Mutual funds are very flexible institution in the stock market, able to meet a wide range of tastes and needs. Therefore, it seems, they are becoming increasingly popular
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