SCHOOL OF BUSINESS ADMINISTRATION
Mutual Fund Investing
Dr. Iqbal (Monty) Mansur
Office: 226 QC
Tel: (610) 499-4321
Mutual funds have been one of the fastest growing institutions in the United States. Since 1996, mutual
fund assets have exceeded commercial bank deposits. The assets size of this industry currently exceeds
$7.5 trillion and employs more than half a million people. Given the prominence of this industry, it is
important that students achieve a good understanding of the industry practices, regulations and key issues
facing the mutual fund industry.
Course Description and Objectives:
This course is intended to present an in-depth review of the mutual fund industry. A mutual fund is a
financial intermediary where savers buy shares of a mutual fund, which in turn invests in various types of
securities. The focus of this course is to explain why investors use financial intermediaries, how a mutual
fund operates, and why a mutual fund differs from other financial intermediaries such as banks or
insurance companies. This course also examines the key characteristics of U.S. equity and bond markets
with particular attention given to the investment process for portfolio managers of stock and bond funds.
Additionally, this course reviews other pooled investment instruments such as hedge funds and closed end
This course consists of lectures, class discussion, and a project. Lecture and class discussion are designed
to demonstrate and illustrate the important concepts and practices facing the mutual fund industry.
At the completion of the course you should be able to understand:
1) how a mutual fund operates?
2) why a mutual fund differs from other financial intermediaries?
3) the regulatory environment faced by the mutual fund industry;
4) the operations of major markets for trading U.S. equities and bonds;
5) the importance of a fund manager and the role of the fund trading desk in implementing portfolio
6) the process of marketing, pricing structures and distribution channels of mutual funds; and
FIN 620, Fall 2007 2
7) the role of U.S. mutual funds in international investments.
Robert C. Pozen, The Mutual Fund Business, 2nd ed. Houghton Mifflin, 2002.
Lee Gremillion, A Purely American Invention: The U.S. Open-End Mutual Fund Industry. The National
Investment Company Service Association, 2001.
The Wall Street Journal
a). Students are expected to study the relevant portion of the course material prior to the class meeting
on which it is to be discussed.
b). Grade will be based primarily on your performance in exams and project, but due consideration will
be given to class participation.
c). Students are responsible for familiarity with materials discussed in class and are not released from
this responsibility because they ceased to attend.
d). Students are expected to maintain an ongoing dialogue with the instructors regarding their project.
Students are expected to submit rough drafts of their project as they progress for review and
guidance by the instructors.
A detailed project outline will be distributed in class.
The University drop policy will be followed.
The "plus-minus" grading scale, as stated below, will be used to assign the final grade.
96 - 100 A 87 - 89 B+ 77 - 79 C+
90 – 95 A- 84 - 86 B 70 - 76 C
80 - 83 B-
Exams and Weights
Final grade will be based on:
Midterm Exam 33.33%
Final Exam 33.33
Team Project 33.33
FIN 620, Fall 2007 3
WEEKLY READING ASSIGNMENT
Sept 10, 17 INTRODUCTION AND OVERVIEW OF COURSE
• Chapter 1 – Indirect Investing Through Mutual funds
What is a Mutual Fund?
Indirect Investing: Mutual Funds versus Commercial Banks
• Chapter 2 – Choosing Among Mutual Funds
Stock Mutual Funds
Bond Mutual Funds
Other Pooled Investment Vehicles
John C. Bogle. The Mutual Fund Industry 60 Years Later: For Better or Worse? Financial
Analysts Journal (January-February 2005):15-24.
Sep. 24 ORGANIZATION AND OPERATION OF MUTUAL FUND
The Organization and Operation of a Mutual Fund
Challenges facing the Mutual Fund Industry
Speaker: Robert Gunia, Chief Administrative Officer, Prudential Investments
• Chapter 5 - Portfolio Management of Stocks
Characteristics of Equity Securities
Oct. 1 REGULATION OF MUTUAL FUNDS
• Chapter 3 – Regulation and Disclosure for Mutual Funds
Disclosure and Advertising Rules
Board of Directors
Enforcement of Ethical Codes
Violations of Regulatory Practices
Speaker: John Fulgoney, Executive VP and General Counsel, PFPC
Oct. 8 MUTUAL FUND PERFORMANCE
J.L. Davis. Mutual Fund Performance and Manager Style. Financial Analysts Journal (January-
Nicholas P.B. Bollen and Jeffrey A. Busse. Short-term Persistence in Mutual Fund Performance.
Review of Financial Studies (2005): 569-597.
Christopher Csrosa. Passive Investing: The Emperor Exposed. Journal of Financial Planning.
(October 2005):54-61. http://www.fpanet.org/journal/articles/2005_Issues/jfp1005-art6.cfm
Oct 15 BOND FUNDS
• Chapter 4 – Portfolio Management of Bonds
Basic Characteristics of Bonds
Risks of Bond Investments
FIN 620, Fall 2007 4
Managing Bond Mutual Funds
Oct. 22 James Philpot, Douglas Hearth, and James Rimbey. Performance Persistence and Management
Skill in nonconventional Bond Mutual Funds. Financial Services Review (2000):247-258.
Speaker: Steve Cianci, Senior VP and Senior Portfolio Manager, Fixed Income
Portfolio, Delaware Investments.
Oct. 29 FUND MARKETING
• Chapter 8 – Retirement Plans and the Fund Business
Tax Qualified Plans
Define Benefit Vs. Defined Contribution Plans
Role of Mutual Funds in 401(k) Plans
The Future of Retirement Plans
Don Ezra. Defined-Benefit and Defined-Contribution Plans of the Future. . Financial Analysts
Journal (January-February 2007):26-30.
Oct. 29 MIDTERM EXAM DUE
Nov. 5 Chapter 7 – Marketing of Mutual Funds
Process of Launching a Mutual Fund
Channels of Distribution
Speaker: Paul E. Suckow, (Retired) Chief Investment Officer, Fixed Income,
Delaware Investment Advisers
Nov. 12 BROKERAGE TRANSACTIONS
Chapter 6 - Brokerage Transactions for Mutual Funds
Overview of U.S. Equity Markets
Roles and Responsibilities of Mutual Fund Traders
Fiduciary Responsibilities of Mutual Fund Traders
Speaker: Mark Lydon, Merrill Lynch.
Nov. 12 CUSTOMER SERVICE
Chapter 9- Servicing Fund Shareholders
Fund Purchases, Redemptions and Exchanges
Transfer Agents as an Industry
Pricing and Service Quality
Speaker: Steve Wynne, President, PFPC.
Nov. 19 HEDGE FUNDS
Global Hedge Funds: Navigate the Maze of Opportunities. PFPC Worldwide Inc. 2004
Richard Bookstaber. Hedge Fund Existential. Financial Analysts Journal (September- October
FIN 620, Fall 2007 5
Burton Malkiel and Atanu Saha. Hedge Funds: Risk and Return. Financial Analysts Journal
(November-December 2005):80-88. http://www.cfapubs.org/doi/pdf/10.2469/faj.v61.n6.2775
Speaker: Dennis J. Westley, Senior VP and Managing Director, PFPC.
Nov. 26 CLOSED END FUNDS
Charles C. M. Lee, Andrei Shleifer and Richard Thaler. Anomalies: Closed –End Mutual Funds.
Journal of Economic Perspectives (Autumn1990): 153-164.(Available in Jstor)
Martina K, Bers and Jeff Madura. The Performance Persistence of Closed-End Funds. Financial
Review. (August 2000): 33-52.
Nov. 26 PROJECT DUE
Dec. 3 FINANCIAL DYNAMICS OF MUTUAL FUNDS
• Review of Fund Prospectus for Expense Information
• The Debate on Management Fee Revenue
• Mergers and Acquisitions
Dec. 10 FINAL EXAM DUE
Please NOTE that the instructor reserves the right to change any items of the syllabus and course guidelines
presented above without the prior approval of the students enrolled in the class.
September 6, 2007