Insight July 2008 Monthly Update

The July issue of Insight provides an in-depth look at mutual fund management expense ratios (MERs), updating and expanding the research we published in April 2005. The feature research article updates the MER picture by providing an “apples to apples” comparison and assessing the impact of the key change drivers. We also document the breadth of the developments on the pricing front and identify the fund complexes that have taken the lead in setting expense benchmarks. It is noteworthy that in a period of rising markets—with generally robust investor returns—downward pressure on MERs has still materialized. This, in our assessment, reflects the fund industry’s underlying competitive dynamic. Going forward, we believe that this trend will continue as weaker market returns and slower industry growth further expose the intense competitive pressures. The July Trend Lines article looks at money market funds. The continuing hot sales streak for short-term funds has created a growing pool of money sitting on the industry sidelines. For banks, success in retaining a significant portion of the gathered money market assets would not only result in a significant boost to their asset bases, but would also confirm their staying power as a formidable collective competitive presence in the funds industry.