Mutual funds may soon be obsolete, according to Bloomberg columnist Chet Currier. This is despite mutual funds enjoying one of their most successful years, with U.S. assets reaching $10 trillion.

A number of financial researchers and professional money managers are arguing that mutual funds are outdated, and are developing a new way of doing things.

The new system is complex, but its basics are straightforward. Start with the proposition that investment returns realized by something like a mutual fund in any given time period can be broken into two pieces.

Label them with Greek letters alpha and beta. Beta is what the fund earns simply by being in the game and can be measured using the market index that corresponds most closely to its style of investing. Suppose the fund beat the index by two percentage points over a given time period. That’s alpha, the skill component.

The New Age thinker says there are better ways to get both alpha and beta. For the beta segment, any good index fund will do and there is no need to pay any manager more than rock-bottom index-fund rates for that. In fact, there is no need for an index fund, either. Futures contracts based on the index or a similar item will do the job.

As to alpha, mutual funds try to achieve some sort of market-beating return by one simple means: owning long stocks. Now, however, a new breed of investment merchants is hawking such goods as “portable alpha.”

As of now, exotic alpha products are only offered to institutions and high-net-worth individuals. In the future, it is only natural to expect more efforts to adapt the alpha-beta model to the mass market, which is now serving mutual funds.

There is a lot more to the whole story, but the alpha-beta community has been growing for years. It may be years before it penetrates the 401(k) marketplace, but a real challenge has been laid down, Currier maintains, and it is not going away.

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