Wealth Think

Although there have been a smattering of articles about a reformation at Janus Capital appearing over the past few months, none has been as colorful or as compelling as one last week in Kiplinger's Personal Finance.

Score one for the mutual fund industry.

A small news item last week on the launch of a financial literacy course in the Shelby County school district in Tennessee this fall got me thinking about a golden opportunity for individual mutual fund companies or, perhaps, the industry as a whole.

It is an honor for Money Management Executive to sponsor SourceMedia's 2007 Fund Operations Awards, our fifth annual, and we would like to thank all those who entered their thoughtful submissions, as well as this year's panel of judges, who gave so generously of their time to assess the impressive entries: T. Neil Bathon, managing director, PMR Associates, Peter Delano, senior analyst, investment management, TowerGroup, Bob Goldberg, president emeritus, The National Investment Company Service Association, Burton J. Greenwald, president, B.J. Greenwald Associates, Vincent Walsh, managing director, advisory services practice, KPMG and Kathleen Whalen, managing director, Dalbar.

While the mutual fund industry has wrangled over, and largely resisted, the logistics and the estimated $617 million cost of complying with Rule 22c-2 for the past three years, funds should actually view the perceived regulatory onus in a new light: As a tremendous marketing opportunity.

Alpha magazine dropped its first shoe when it released the salaries of the top 100 hedge fund managers, with the top master of the universe, James Simons, earning an astonishing $1.7 billion in 2006 and the top 25 an average of more than half a billion. In 2006, the compensation of this top 25 soared 57% from the year before and 127% from 2004.

As the $144.5 billion playing field for target-date, or lifecycle, funds continues to get more and more crowded-last year fund companies introduced 302 target-date funds and assets soared 61%-the funds are diversifying their holdings to distinguish themselves. Others are extending their equity exposure with the goal of equipping longer-living retirees with enough money to last throughout their lifetimes.

China's equity market has reached such a frenzy of irrational exuberance that Chinese authorities are not the only ones sounding warnings about the market becoming overheated.

Whether it's protection of their own investments or a sense of responsibility to the world, there is an intriguing, if not unexpected, movement developing among mutual fund investors.

In their zeal to cash in on the latest investment craze, fund companies all too often have displayed a lack of originality and bad timing when launching new funds. Since exchange-traded funds have taken all of the major indexes, those that have come late to the ETF rage have come out with incredibly narrow niche and enhanced index funds that defy logic.