US Fund Investment Increases, But Managers Slammed For Poor Perfomance

by Philip Morton, Investors Offshore.com

15 November 2001

According to a recent survey conducted by the Investment Company Institute, the number of US households holding mutual funds has continued to rise, despite a steep decline in stocks.

The ICI announced on Monday that as of May this year, 52% of American households owned mutual funds, up from 49% for the same period in 2000, which is surprising given the poor market performance in the latter part of 2000 and the continued decline throughout this year.

However, the ICI believes that this increase may be due to a heightened desire for diversification, with investors adding bond funds and money market funds to their portfolios, although it recorded that almost nine out of ten fund-owning households have some stock funds still among their holdings.

Despite the news that the average US household surveyed has around $40,000 total in funds, managers of the pooled investment vehicles have come under fire recently, with analysts attacking from all sides. In a report on the mutual fund industry released earlier this year, William Bernstein offered a scathing critique, observing that: 'The deeper one delves, the worse things look for actively managed funds; 99% of fund managers demonstrate no evidence of skill whatsoever.'

And the news doesn't get any better for the beleaguered fund managers, who as reported in InvestorsOffshore this week, look to be facing a substantial cut in compensation levels this year. A recent FTMarketwatch report quoted investment giant Peter Lynch as observing that: 'All the time and effort people devote to picking the right fund, the hot hand, the great manager, have in most cases led to no advantage.'

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