tailieunhanh - Mutual Funds and Institutional Accounts: A Comparison

The main differences between a hedge fund and a private equity fund are: (a) the private equity fund looks to use leverage to buy companies to obtain full management control for purposes of changing its structure operations, whereas a hedge fund trades assets without looking for full control; (b) the hedge fund covers a multitude of styles, only one small part of which might involve buying shares to force management to make value enhancing changes (activist); and (c) hedge funds often (but not always) have a shorter investment horizon than private equity firms. Overall, hedge funds. | Mutual Funds and Institutional Accounts A Comparison O INVESTMENT COMPANY INSTITUTE 1. Introduction The SEC recently directed mutual funds to provide additional disclosure about factors that fund boards consider during advisory contract Fund documents must now disclose whether in renewing the fund s advisory contract the board relied on a comparison of fees and services of other funds or other types of clients such as institutional investors or pension funds. Mutual funds and institutional accounts are very different investment Mutual funds are primarily retail products which gather assets from vast numbers of individuals who have limited balances to invest. Institutional accounts gather assets from a limited number of clients who have millions or even billions of dollars to invest. Mutual funds and institutional accounts are distributed differently operate under different legal and regulatory structures and have different business risks. In addition the advisory contracts of institutional accounts typically cover portfolio management but little else whereas the advisory contracts of mutual funds are usually broad-based covering portfolio management and a range of other services. Even portfolio management can differ importantly between the two products. Recent analyses have made much of the fact that mutual fund advisory fees tend to be higher than those of institutional accounts as illustrated in Figure 1 . Such comparisons can be highly misleading because of the dissimilarities between mutual funds and institutional accounts. This paper highlights key differences between the two products. A wide range of factors influences the relative advisory fees of the two products. Thus there are no simple rules by which fund boards can compare the fees of such products. When assessing mutual fund fees there is no substitute for the considered business judgment of fund boards. 1 Disclosure Regarding Approval of Investment Advisory Contracts by Directors

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