A mutual fund complex is a family of mutual funds. Mutual funds are a diversified investment product that makes it possible for investors to own a portion of a larger portfolio of shares managed by a professional manager. A fund family is a company that offers a wide array of mutual funds to investors.
Choosing a mutual fund that is part of a large family offers investors a wide selection of funds from which to choose. This can be advantageous, because many fund families allow investors to switch funds with minimal or no additional fees. Switching to funds that focus on better performing sectors can potentially lead to higher overall returns. For example, if the market is turning bearish, investors may wish to move their money from stock funds into bond funds.
Larger fund families offer prestige within the investment community. As a result, they can attract talented fund managers who have proven performance records. A study performed by Emory University and published in 2000 found that the top 6 percent of all fund managers significantly outperformed the market well above their peers. Attracting this talent can offer investors an important advantage.
Larger fund complexes rely on their reputation. Abuse and fraud could impact sales and soil their names, so large fund families typically go to great lengths to ensure all funds that carry their name operate above board. Some large funds even absorb unusual investor losses to maintain a good relationship with their clients.
Many of the funds in a complex have long track records. A new fund with a relatively short track record makes it difficult for potential investors to know how the fund performed relative to other funds during changing market conditions. For example, a fund may perform well under bull market conditions, but lose more money than competitors during bear market conditions. A lengthy track record can help investors sort out funds that have underperformed in the past.
Donald Harder has been writing financial-related articles since 2000 when he founded the firm Securities Research Services. He has worked as a speech writer for the U.S. Department of Justice and written white papers and studies for the U.S. Department of Housing and Urban Development. Harder holds a Master of Arts in international affairs from George Washington University.