Disruptive Investing

Figure 1 (click to enlarge) The mutual fund industry consists of a complex web of connections, many to many relationships, wherein information is exchanged for value. Dissecting each class of member in this diagram, you can imagine what type of information trades for what types of value. Value is created at the source, where mutual funds are generated and managed. Better fund cosntruction results in better value. Skilled fund managers tend to attract more assets under management (AUM). Even unskilled fund managers can too, if they have really good marketing, and good distribution via the channels. Skilled and unskilled investors gain access to that value thru a variety of channels, and are willing to pay management fees for that value. Some call this value "alpha", that is, the amount of return gained above what the market would otherwise bear. We can't forget risk, so investors are also 'buying' a certain degree of mitigation of risk which is another form of v...

• Mutual Fund (List of Assets) – Does not have physical size, weight, color – Does have a ‘particular collection’ of virtual assets – The construct of the collection defines the potential for value – It can be sold as-is, repackaged with other funds, grouped with dissimilar asset classes for added diversification and preservation of capital – Hence, the concept of a supply chain can be applied to the distribution of funds (via wholesalers and distributors) and in the reverse to the collection of capital (AUM) and management and distribution fees (loads, premiums, expenses, …) •Fund of Funds (List of Lists) – This is layering cost upon cost, idea upon idea – Value created, perhaps also undermined?