The two most important policy differences between Vice President Al Gore and Texas Governor George W. Bush that could affect mutual fund investment are tax cuts and social security reform. Bush is promising a dramatic tax cut for all tax payers, while Gore is promising a narrower tax cut for middle income earners. Bush is calling for some privatization of social security while Gore is advocating expanding other types of retirement savings plans such as 401(k)s and providing incentives for individuals to invest in these plans by offering government matching funds.

Several fund companies, including American Century Investments of Kansas City, Mo., Franklin Templeton of San Mateo, Calif. and Citigroup of New York, said the outcome of the presidential race would be inconsequential to the industry. Others, including Invesco of Denver, USAA of San Antonio, Texas and Schwab of San Francisco declined to comment. Several companies which declined to comment said they did so to avoid alienating voters.

Several analysts agreed with the fund companies which said the outcome of the presidential race will not have a significant impact on the mutual fund industry.

Bush's policies seem, on the surface, to encourage mutual fund investment, according to Sheldon Jacobs, editor of No-Load Fund Investor newsletter of Irvington, N.Y. Bush's tax cut would benefit those who would invest, and it's not good for the market to spend millions on government programs, as Gore is planning to do, Jacobs said. What is certain is that the economy will benefit from paying down the national debt and it will suffer if either candidate, once elected, spends the current budget surplus, he said.

The economy is never very strong in the year following a change in administration, Jacobs said. Seven of the last 15 years after a presidential change were down years in the market, and the up years only averaged a 4.7 percent increase in the Dow Industrial Average, said Jacobs.

"New presidents always find religion in their first years and do the tough things like closing military bases," Jacobs said.

Gore's economic plan would completely eliminate the national debt by 2012, according to the Gore campaign.

It is doubtful that Bush's tax cut would improve investment, said Russ Kinnel, director of fund analysis at Morningstar. While the Bush tax cut may lead wealthier people to invest more, it is uncertain whether more income for middle and lower income earners will result in more investment since the last several years have seen incomes rise significantly while savings rates have remained constant, he said.

While funds would benefit from Social Security reform - either privatization or expanded retirement plans - any signficant policy change will take years to enact, Kinnel said. Anything to do with Social Security will go through so many changes before it becomes law, "it's still early days," Kinnel said.

Social Security reform does appear to offer the best future for fund growth, according to an ICI report on Social Security published in December, 1998. Of the $4.5 trillion in assets held by the mutual fund industry at that time, about 35 percent were held in retirement savings vehicles, including IRAs, 403(b) accounts, and 401(k) plans, the report said. The ICI supports the notion that protecting Social Security should still be lawmakers' number one priority, to "assure a floor benefit to the many Americans who have not had the benefit of employer-sponsored retirement plan nor the ability to accrue substantial individual savings." This is a position closer to Gore's.

If the Social Security system is privatized, the ICI wants regulations to protect investors and a massive investor education programs. The ICI further recommends that initially investors only be allowed to invest their retirement funds in government-sponsored funds, and then later to be able to choose privately run funds. Also, the ICI wants an expansion of existing retirement plans to allow more before-tax investment.

Like Jacobs, Kinnel did not predict high growth for mutual fund investment no matter who wins the election. Growth will not occur at the same rate as the last few years so some fund companies will do poorly, Kinnel said.

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