A handful of mutual fund companies have begun supplying investors with quarterly statements that list their individual rates of return, and other fund companies are expected to follow suit. Most mutual fund companies simply provide investors with return rates for all of the funds in a complex.
Now, personal rates of return can show investors their portfolio's total return rate based on their asset allocation, dates and amounts of investments and redemptions, cash distributions and exchanges between funds.
"Eventually, fund companies will provide this information because the competition will force them to," said Virginia Gobats, an analyst at Dalbar, a mutual fund research company in Boston. "Return rates are the most important measurement an investor cares about, and for a statement to truly function as a retention document, it should include this data." Dalbar is the former publisher of Mutual Fund Market News.
American Century Investments of Kansas City, Mo., and MassMutual of Springfield, Mass., are two mutual fund companies now supplying investors with personalized rates of return each quarter. At least six mutual fund companies are currently supplying investors with individualized rates of return, based on a survey of 88 fund companies conducted by Dalbar, Gobats said.
Besides quarterly individualized rates of returns, American Century's and MassMutual's statements list individualized year-to-date rates of return as well as pie charts showing percentages of assets invested in various asset classes. American Century also includes a graph showing the growth of a portfolio's total value and underlying net investments, and lists average annual return since inception. The firm also shows change in performance from one quarter to the next.
"We wanted to make the statements very visual, so that people who were not numbers-oriented could visually see how their portfolio was performing," said Julie Arciszewski, director of marketing at MassMutual. MassMutual only supplies the personalized rates of returns to its defined contribution customers. It plans eventually to provide them to all its customers, said Arciszewski.
"People told us that even though they know it is a long-term investment, they still want to know how their investments are doing from one quarter to the next," said Roberta Laughlin, manager of shareholder communications at American Century. "They like that immediate gratification."
Although neither American Century nor MassMutual has calculated whether or not the enhanced statements have prompted investors to increase their savings, both Arciszewski and Laughlin said the statements have strengthened customer relations.
Next year, MassMutual plans to offer investors a more comprehensive retirement statement that lists their defined contribution investments, any defined benefits as well as expected social security income, Arciszewski said. American Century further hopes to provide statements with varying levels of detail depending on investors' requests.
Many mutual fund companies have considered offering personalized statements, said Gobats of Dalbar. But, they have mistakenly believed that the calculations are too burdensome or that investors might respond negatively if they notice a decline in their return rate.
"If we are to believe the statistics, that the average investor has a relationship with 3.5 mutual fund companies, and one of those companies is giving them constant feedback and a succinct score, it's possible the investor will move all of their money to that company," Gobats said. "We still see resistance, but it is a lot less than two years ago."
