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Nominating Committee
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Written by Jay Keeshan and C. Meyrick Payne
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MPI’s last bulletin discussed the effectiveness of mutual funds and their governance model during the recent economic upheaval. It stressed the importance of mutual fund boards as well as the prospect of their getting more attention as a new financial regulatory structure is laid out. While much is still to be determined, it is likely that there will continue to be a need for highly qualified individuals to serve as independent directors to help oversee America’s mutual funds, exchange traded funds, and potentially even hedge funds.
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Full Board
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Written by C. Meyrick Payne
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Turbulent times bring out the best and worst in every aspect of financial investing. Once again, mutual funds are proving to be an appropriate investment for individuals, families and small organizations. Mutual funds are safer and less volatile in turbulent times because of their professional management, diversification, transparency, and governance structure.
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Contract Committee
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Written by C. Meyrick Payne and Jay Keeshan
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Since the inception of the Investment Act of 1940, one of the critical duties of mutual fund directors has been the annual approval or renewal of the investment advisory contract. As part of the process, directors must review crucial data for each fund they govern, which includes comparisons with peers on numerous issues including investment performance, fees, and profitability. In addition to the profitability of the advisory contract, directors must review and evaluate any potential “fall-out benefits” to the advisor that may result from other fees charged to the fund (i.e. transfer agency or administrative fees). A more recent SEC ruling in June of 2004 now requires that directors disclose information on how and why they came to various decisions they make during contract renewal.
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Compensation Committee
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Written by C. Meyrick Payne and Jay Keeshan
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C. Meyrick Payne and Jay Keeshan, Management Practice, Inc (MPI). Data for this Bulletin is principally drawn from the MPI Annual Survey of Trustee Compensation and Governance Practices.
Independent mutual fund directors, who have the authority to annually review and renew the investment advisory contract, have proven to be a cost efficient and effective way to govern the collective investments of millions of Americans. Occasionally this statement is called into question. In the paragraphs which follow, we highlight four ways to quantify the cost efficiency and market effectiveness of independent mutual fund directors.
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Investment Committee
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Written by By Jay Keeshan and C. Meyrick Payne
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In recent years the topic of securities lending has become an important issue for mutual fund directors, in large part due to advances in technology, which have made the lending process more streamlined and allowed significant profits to be earned. These, in turn, mean higher returns for fund shareholders. In fact the total profits earned by US mutual funds from securities lending in 2006 was $760 million, up from $510 million in 2005. Whether a fund is currently lending its shareholdings or not, it is important for fund directors to stay current with this rapidly changing element of the fund industry.
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