The Fund Industry: How Your Money is Managed, 2nd Edition

Preface to the Second Edition

We were surprised by how much has changed in the fund industry over the past four years. When we submitted the manuscript to the first edition in the summer of 2010, we thought we had a pretty good picture of what the business would look like in the post-credit-crisis world. By that time, the collapse of Lehman Brothers was an old story, and the Dodd-Frank financial reform was the new law of the land.

But, as usual, reality has a way of defying expectations. The speed and the magnitude of the changes were breathtaking; for example, mutual funds and hedge funds were converging at a much faster pace than we anticipated. And there were a host of smaller changes, like the adoption of a pay-to-play rule by the SEC and the development of a new data source on distribution through intermediaries—the latter resulting from the explosion in the use of omnibus accounts for shareholder recordkeeping.

To capture this new reality, we needed to make some significant changes in this book. This second edition has:

• Expanded chapter on ETFs. Now that exchange-traded funds are 10 percent of the industry's total assets, we felt that they deserved a chapter of their own, which gave us more room to review their investment approaches and the outlook for their future.
• New chapter on hedge funds. We moved the discussion of hedge funds to a separate chapter as well, given their continued rapid growth. This chapter was entirely revamped to reflect the major changes in private ...