Disruptive Investing

Figure 1 (click to enlarge) Now, we have defined mutual funds as digital assets that can be distributed thru a virtual network, from source where the value is created and managed, to the retail investors where payment of fees is made (plus information about self is granted) in exchange for that created / perceived value, via the wholesalers, distributors, financial advisors and institutional investing networks. But not all is simple, mutual fund managers must navigate a stormy sea of: • Redemptions (clients departing) • Performance (NAV decreasing, Cap gains & Dividends decreasing) • Risk (volatility increasing) • Asset Allocation (what’s the right mix?) • Modeling (efficient frontier “what ifs”) • Competition (perception of better & best) • Disintermediation / Transparency? • Reputation (least worst performing?) • Future? - How will they perform relative to their peers and other assets such as Hedge Funds and ETFs (Exchange Traded Funds)? – Independent scoring of “Diversificat...

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...