Risk Disclosure by Mutual Funds
The Need for Information about Mutual Fund Risks
The growth in the U.S. mutual fund industry in recent years has been explosive. Individuals invest in such funds directly and through retirement funds such as 401(k) plans. With broader use comes the need for investors and their advisors to have more and better information concerning the nature of the investments these funds undertake. To help achieve this goal, in March 1995 the U.S. Securities and Exchange Commission (SEC) issued a Concept Release and Request for Comments on "Improving Descriptions of Risk by Mutual Funds and Other Investment Companies". Interest was great - 3,600 individual investors submitted comment letters and the Investment Company Institute (an industry trade association) surveyed an additional 600 fund shareholders on the subject…
… the Financial Economists Roundtable examined the issue of mutual fund disclosure and reached the following conclusions:
Current disclosure practices in the mutual fund industry are inadequate. Investors and their advisors need more information to help them assess the risks associated with investment in mutual funds.
Since the impact of a single mutual fund on an investor's overall financial situation may be complex...
