Mutual Funds

Largest Fund Companies

According to Lipper, the 25 largest mutual fund families manage more than 75% of the industry’s assets; the top 10 companies control 53%, and the biggest 60 oversee nearly 92% of all mutual fund assets. The table below shows the top eight fund companies, as of early 2016 (note: “t” = trillion). BlackRock clearly dominates the field (source:

Largest Mutual Fund Companies  [2016]




Unwanted Tax Consequences

There are three taxable events with a mutual fund: (1) sale of securities within the portfolio, (2) the declaration and payment of dividends and/or interest from the portfolio’s securities, and (3) sale of mutual fund shares. Your clients cannot control whether or not a fund is going to sell one or more securities for a profit or loss. Similarly, they cannot stop the payment of dividends and/or interest. The third event is the only one controllable by the shareholder.

Determining Actual Fund Costs

A mutual fund’s total costs are measured differently, depending upon the study or expert cited. For example, Kopcke reviewed the 100 largest domestic stock funds owned by defined contribution plans. Kopcke found trading costs averaged 0.11% of assets annually in the quintile with the lowest costs and 1.99% of assets in the quintile with the highest cost, with a median of 0.66%.

How to Evaluate Stocks; For Financial Advisors

As advisors, we sometimes forget the basics: a stock represents a fractional ownership interest in a publicly traded corporation. Historically, returns have been higher for owners and partial owners (stocks) than someone who lent money (notes and bonds). Stocks can be characterized by size (capitalization): small cap, medium cap, and large cap. A publicly traded company’s capitalization is calculated by multiplying the price per share by the number of outstanding shares of stock.

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Largest Mutual Funds

Largest Mutual Funds

Table 9 lists the largest mutual funds in the U.S. as of December 2015, according to


Table 9

20 Largest Mutual Funds as of December 2015


Vanguard 500 Index; Adm  (VFIAX)

Vanguard Total Stock; Inv  (VGTSX)

Vanguard TSM Index; Adm  (VTSAX)

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Superior Active Fund Management

Arnott (1993) and Odelbo (1995)

Arnott (1993) reviewed characteristics of equity funds with superior returns, finding 17 actively-managed large cap funds outperforming their benchmark in 37 out of 49 rolling 5-year periods ending 1993. A paper by Odelbo (1995) found great stock fund managers did not exclusively follow one investment style while looking for undervalued stocks. The author also found there was no statistical evidence of their superior performance.


Chevalier and Ellison (1999)

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Efficient Markets

Harvard’s Endowment Fund

The $33 billion Harvard portfolio is the largest endowment fund in the world. Harvard relies on its endowment fund to cover the costs of more than a third of the university’s operating budget (source: WSJ, June 23, 2014). Despite paying some of its money managers multi-million dollar salaries, Harvard’s endowment fund returns have lagged its peers (see table below).


5-Year Annualized Returns of Elite School Endowment Funds

[ending June 30, 2014]


Fall of Active Fund Managers

The WSJ writes Charles Ellis is “widely regarded as the dean of the investment-management industry” (source: WSJ, August 23, 2014). According to Ellis, age 76, author of 16 books and former chairperson of Yale’s investment committee, “With rare exceptions, active management is no longer able to earn its keep.”


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