Leithner & Company Pty Ltd

Distinguishing Features

In the past 50 years, mutual funds [which in Australia are usually called “managed funds”] have gone from a $2.5 billion also-ran in the financial-services industry to a $7 trillion titan. Funds now enjoy an unchallenged position of leadership, accounting for 70% of the $2 trillion that U.S. families added to their savings over the past five years.

But while mutual funds may be the best game in town, they aren’t playing nearly as good a game as they should. The returns of fund shareholders in stock, bond and money markets have fallen far short of what is available in those segments. A diminishing focus on stewardship, shrinking investment horizons and soaring costs are responsible. The mutual fund industry has lost its way.

I’ve been studying mutual funds since 1949, when I began researching my senior thesis at Princeton University. The change in industry direction has been dramatic. Back then, the mutual-fund industry was more a management business than a marketing business; today the reverse is true. We have moved from treating funds as investment trusts designed to serve their owner-beneficiaries to treating funds as consumer products, designed to attract the largest possible assets. This new approach has ill-served the interests of [investors].

John C. Bogle
How Mutual Funds Lost Their Way
(The Wall Street Journal, 20 June 2000)

To read the full document, click here (PDF).

Chris Leithner