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  1. 1. WIDENER UNIVERSITY SCHOOL OF BUSINESS ADMINISTRATION FINANCE 620 Mutual Fund Investing Fall 2007 Dr. Iqbal (Monty) Mansur Office: 226 QC Tel: (610) 499-4321 Email: Web: ____________________________________________________________________________________ Purpose 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 funds. 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. Learning Objectives: 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 management decisions; 6) the process of marketing, pricing structures and distribution channels of mutual funds; and
  2. 2. FIN 620, Fall 2007 2 7) the role of U.S. mutual funds in international investments. Required Text: Robert C. Pozen, The Mutual Fund Business, 2nd ed. Houghton Mifflin, 2002. Additional Readings: 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 Student Evaluation: 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. Term project: A detailed project outline will be distributed in class. Drop Policy The University drop policy will be followed. Grading Procedures 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
  3. 3. FIN 620, Fall 2007 3 WEEKLY READING ASSIGNMENT _____________________________________________________________________________________________ Date: 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 STOCK FUNDS • Chapter 5 - Portfolio Management of Stocks  Characteristics of Equity Securities  Equity Research  Equity Valuation  Portfolio Management  Fund Performance Oct. 1 REGULATION OF MUTUAL FUNDS • Chapter 3 – Regulation and Disclosure for Mutual Funds  Disclosure and Advertising Rules  Electronic Disclosures  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- February 2001):19-27. 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. Oct 15 BOND FUNDS • Chapter 4 – Portfolio Management of Bonds  Basic Characteristics of Bonds  Risks of Bond Investments
  4. 4. 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  IRAs  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  Broker-Dealers  Direct Marketing  Needs-Based Marketing 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 2003): 19-23.
  5. 5. FIN 620, Fall 2007 5 Burton Malkiel and Atanu Saha. Hedge Funds: Risk and Return. Financial Analysts Journal (November-December 2005):80-88. 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 Chapter 10 • 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