Morningstar Advisor - April/May 2011 - (Page 7)

Letter From the Editor Keep Pushing In this issue, we take a look at the ins and outs of the U.S. mutual fund industry. If there’s one theme to take away, it’s that the U.S. fund industry, and its shareholders, shouldn’t rest on its laurels. Global competition is heating up. Jerry Kerns On one hand, the fund industry can take heart in the results of Morningstar’s new Global Fund Investor Experience Survey (“U.S. Fund Investors Have It Good,” Page 42). Released in March, the report says that U.S. mutual fund shareholders enjoy the top investor experience in the world (thanks largely to the pressure put on the industry and regulators by financial advisors). Although the report doesn’t directly grade the fund industry per se (it considers all factors that shape an investor’s experience with mutual funds), U.S. funds clearly are doing many things correctly for their shareholders. The United States leads the world in areas such as disclosure, fees, and sales practices. Still, researchers John Rekenthaler and Ben Alpert say that advisors must continue to push for better treatment, because although the United States is tops now, other countries are moving to improve. And competition is growing quickly. Robert Pozen, the former MFS and Fidelity executive, and Theresa Hamacher, president of the fund-industry group National Investment Company Service Association, argue that Europe is now the global fund-industry leader (“The Global Fund Leadership Playoffs: Europe vs. the United States,” Page 38). They say that Europeans have a built a fund model—called UCITS—that is designed to be exportable and give retail investors access to sophisticated strategies. UCITS, they say, are rapidly gaining acceptance all over the world. The U.S. mutual fund, meanwhile, has been relegated to being a domestic product. The executives of two U.S. fund companies see the potential of the global market. In this issue’s Morningstar Conversation (“U.S. Fund Firms Learn to Speak UCITS,” Page 47), Greg Johnson of Franklin Templeton and John Gunn and Tom Mistele of Dodge & Cox tell Christopher Traulsen, Morningstar’s head of fund research for Europe/Asia, about their experiences of expanding into foreign markets and setting up UCITS funds. Franklin Templeton has been a successful global player for years, and Dodge & Cox is a new entrant. Both face the challenge of sticking to their investment philosophies while catering to the often short-term demands of investors country by country. Despite the difficulties, all agree that there are tremendous opportunities in Europe, Asia, and Latin America as more and more individuals become investors. So although the U.S. fund industry is healthy, it must keep improving. Don Phillips, while hopeful, wonders if the industry is up to the challenge (“Buying Good Funds, Poorly,” Page 80). He puts on the onus on advisors and investors to continue to have high standards when choosing funds. While it’s true that advisors can take a lot of the credit for the current U.S. investing environment, they must not let down their guards. 7

Table of Contents for the Digital Edition of Morningstar Advisor - April/May 2011

Morningstar Advisor - April/May 2011
Letter From the Editor
The Debate That Matters Most
What Can the Mutual Fund Industry Do Better?
Cool Logic, Warm Intent
How to Start a Mutual Fund
Owner and Operator
Middle East Revolts Roil Oil Markets
Four Picks for the Present
Investment Briefs
How We Improve Our Odds of Picking Outperformers
Health Care Survived 2010, but Investors Want Proof
The Global Fund-Leadership Playoffs: Europe vs. the United States
U.S. Fund Investors Have It Good
U.S. Fund Firms Learn to Speak UCITS
Balancing Act
The Tamer Ride
Investors Lend a Hand
Healthy, Wealthy, and Wide
Foreign Funds That Win at Concentration
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
VAs Finish 2010 With a Solid Gain
Buying Good Funds, Poorly

Morningstar Advisor - April/May 2011