Strategies and Mechanisms for the Development of Management Companies

Стратегии и механизмы развития управляющих компаний

Simonov, Andrey (Симонов, Андрей) ()
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Simonov, Andrey (Симонов, Андрей): Russian Presidential Academy of National Economy and Public Administration (RANEPA), Michigan State University, Gaidar Institute for Economic Policy

Working Papers from Russian Presidential Academy of National Economy and Public Administration

Abstract: The mutual fund industry is one of the largest investors and, as a result, drivers of the development of financial markets. About half of the world industry for the cost of net assets under management is accounted for by American management companies. According to the Investment Company Institute for 2014, 46.3% of US households have investments in mutual funds. Such a high demand for the financial products of the mutual fund industry is due to a number of their significant advantages: a low minimum investment threshold, a diversified portfolio, professional management, high liquidity of the units, a wide choice of investment strategies, tight industry control by the regulator, etc. At the same time, investing in a unit fund has its drawbacks, including: commission fees for portfolio management services, additional costs associated with the acquisition and redemption of units (surcharge and discount). However, do negative sides end from investing in mutual funds? Potential investors, choosing a management company and a fund for investment, tend to a higher yield with an acceptable level of risk and minimum commission costs. The income of management companies is formed at the expense of commission costs of shareholders, representing a fixed (or slightly variable) percentage of the value of net assets under management. Thus, the interests of management companies are directly related to the increase in the two components of their income: commission costs and the value of net assets under management. If the amount of commission costs is largely determined by the level of competition between management companies, then the total value of net assets can be influenced in various ways.

Pages: 70 pages
Date: 2018-03
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