On the failure of mutual fund industry regulation

Mugerman, Yevgeny; Hecht, Yoel; Wiener, Zvi

doi:10.1016/j.ememar.2018.11.010

Cited by 15 publications

(9 citation statements)

References 6 publications

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“…Our results have practical relevance because retail investors increasingly use mutual funds to supplement their pensions (Diltz and Rakowski, 2018). Moreover, mutual fund regulations are fairly similar across the globe (Mugerman et al, 2019), which suggests that our results may be applicable to other jurisdictions as well. Finally, our findings are topical because the European Commission (EC) is currently revising the regulation concerning shortform disclosure requirements of mutual funds marketed in the EU.…”

Section: Introductionmentioning

confidence: 54%

“…Our empirical results have practical implications, most notably in relation to the PRIIPs KID. Moreover, since mutual fund regulations are fairly similar across the world (Mugerman et al, 2019), our findings may generalize to other jurisdictions as well. As a practical implication for IJBM 40,4 the industry, asset managers may use our results to identify pieces of information that are relevant to investors and use such information for marketing purposes.…”

Section: Practical Implicationsmentioning

confidence: 64%

“…Retail asset management is a strictly regulated industry (Mugerman et al, 2019). Retail investors are vulnerable to managerial opportunism in the mutual fund market, which necessitates market interventions such as mandating better disclosure (Zingales, 2009).…”

Section: Introductionmentioning

confidence: 99%

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Key investor information disclosure regulation and retail mutual fund flows in the Finnish market

Turtiainen

Saastamoinen

Suhonen

et al. 2022

IJBM

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PurposeIn the European Union, the Undertakings for Collective Investment in Transferable Securities Directive (UCITS IV) requires fund management companies to provide a Key Investor Information Document (UCITS KIID) for investors. This papers uses archival data from the Finnish mutual fund market to test how the regulation's information disclosure requirements concerning past performance, risk and fund fees are associated with mutual fund flows.Design/methodology/approachThe study uses archival data on the mutual funds market in Finland to test how the regulation relating to retail investors' information requirements is associated with mutual fund flows.FindingsOur findings suggest that the UCITS KIID predicts retail investors' fund flows. While past performance is associated with fund flows throughout the observation period, retail investors appear to have become more sensitive to fund fees and invest in less risky funds following the adoption of the UCITS IV period.Practical implicationsInformation relating to fund fees and risk appears to be relevant to retail investors, which should be acknowledged in future iterations of short-form disclosure and in mutual fund marketing.Originality/valueThis paper is the first to assess the significance of KIID in actual market environment.

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Section: Introductionmentioning

confidence: 54%

Section: Practical Implicationsmentioning

confidence: 64%

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Key investor information disclosure regulation and retail mutual fund flows in the Finnish market

Turtiainen

Saastamoinen

Suhonen

et al. 2022

IJBM

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“…First, the lack of a standardized measure of fund ratings across the mutual fund industry causes rating agencies to use diverse rating methodologies that are not entirely disclosed, engendering a wide array of difficulties for investors. Furthermore, rating agencies have a tendency for achieving their own objectives, which do not necessarily coincide with investor protection or the improvement of the overall fund industry [12]. Second, fund analysts may obtain additional information from interviews with key executives or fund managers, and such qualitative information cannot be easily reflected into the quantitative fund ratings.…”

Section: Literature Reviewmentioning

confidence: 99%

Fund Ratings of Socially Responsible Investing (SRI) Funds: A Precautionary Note

Budsaratragoon

Jitmaneeroj

2021

Sustainability

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We examine fund ratings of socially responsible investing (SRI) equity funds in emerging and developed markets by validating the assumptions of the equally weighted U.S. News mutual fund scorecard and the causal interrelations among its rating agencies—Morningstar, Lipper, Zacks, CFRA and TheStreet—for improvement priorities. In so doing, we apply a novel interdisciplinary methodology including cluster analysis, classification analysis, partial least squares structural equation modeling and importance performance analysis. We find evidence against the U.S. News assumptions, as individual rating agencies have unequal effects and exhibit the causal relationships among one another. We suggest emerging (developed) market fund managers allocate their resources—which are often limited—with the first priority to improving fund ratings of CFRA (Zacks), followed by Zacks (CFRA), TheStreet (Lipper), Lipper (Morningstar) and Morningstar (TheStreet). The positive causal relationships among rating agencies indicates that investors consider multiple rating agencies of the U.S. News for investment decisions, rather than simply use any single one of these rating agencies or their equally weighted aggregation. Interestingly, we find disagreement among rating agencies, with Zack (TheStreet) displaying rating deflation for emerging (developed) market funds. Disagreement among rating agencies may increase the monitoring effort of fund managers who usually “shop” for additional ratings in the hope of maximizing their average ratings.

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“…FinTech, as an industry, is now \too big to fail", a perspective that departs from the \too small to care" and \too big to ignore" continuum. In other words, without appropriate regulatory attention, the future of FinTech may be bleak, with gaps in market risk management¯lled by thirdparty speculators and analysts which may not bene¯t the end consumers (see, Mugerman et al, 2019). The disruptive forces and their implications for FinTech, regulators and wider¯nancial markets were then discussed, leading to the identi¯cation of limited literature on FinTech frameworks and the observation that studies found no coherent understanding of FinTech and its implications (e.g., Arner et al, 2015;Gomber et al, 2017;Zavolokina et al, 2016).…”

Section: Conclusion Limitations and Future Directionsmentioning

confidence: 99%

The Age of FinTech: Implications for Research, Policy and Practice

Mention

2020

J. FinTech

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FinTech is inducing changes in how financial services (FS) are perceived, developed, promoted, delivered and consumed. Future of FinTech, however, is rooted in deliberate integrated actions to improve framework conditions related to consumer trust, regulation and scalability. Building on limited scholarship, this paper identifies the building blocks for the future of FinTech and provides prescriptive areas of focus to guide research, policy and practice. In sum, the purpose of the paper is to serve as a catalyst and a call for an integrative approach in developing a common understanding and interpretation of FinTech as a socially-constructed phenomenon at the intersection of research and technology management.

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On the failure of mutual fund industry regulation

Cited by 15 publications

References 6 publications

Key investor information disclosure regulation and retail mutual fund flows in the Finnish market

Key investor information disclosure regulation and retail mutual fund flows in the Finnish market

Fund Ratings of Socially Responsible Investing (SRI) Funds: A Precautionary Note

The Age of FinTech: Implications for Research, Policy and Practice

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