September 19, 1995
TO: ACCOUNTING/TREASURERS COMMITTEE No. 36-95
MARKETING POLICY COMMITTEE No. 45-95
RESEARCH COMMITTEE No. 34-95
RE: Minutes of the Research Committee Meeting, June 9, 1995
______________________________________________________________________________
The Research Committee met in Washington, D.C. on June 9, 1995. These minutes identify major
discussion items and highlight any conclusions reached or actions proposed.
I. Opening Remarks
Hal Cogger of Colonial, Chairman of the Research Committee, called the Research Committee
meeting to order. He reminded all present of the importance of adhering to antitrust laws in
discussions.
II. Review of Current Research
Sandy West and Kathy Rabon-Summers reviewed research in progress and the expected
completion date for projects. Sandy informed members that, in response to the SEC’s concept
release on mutual fund risk disclosure, ICI’s marketing research staff is surveying shareholders to
assess their preferences for various risk measurements, such as beta and standard deviation. She
also reviewed the progress of research on shareholders’ assessment of the profile prospectus,
information and advice for shareholders, and bank marketing. Ms. Rabon-Summers apprised
members of the status of the 401(k) and directors’ fees studies.
III. Report from the Planning Subcommittee
The Committee received a report from Russ Haskell, Chairman of the Planning Subcommittee.
He indicated that the Subcommittee’s objective was to develop project ideas that fall into
Categories 2 and 3 of the Institute’s research framework. (Category 1 projects are policy
research initiated by ICI’s legal and legislative staff.) Categories 2 and 3 are defined as follows:
Category 2: Basic industry research projects with a policy application. These long-term
projects must support ICI policy initiatives, but not necessarily a specific policy issue.
ICI staff and Research Committee members will work together to identify Category 2
topics.
Category 3: Participant-funded research projects that have a business/marketing
application and little policy application. ICI staff and Research Committee members
will work together to identify Category 3 topics.
Toward that goal, from the 56 ideas submitted by members, the Planning Subcommittee
developed four Category 2 projects:
Planning and Preparing for Retirement: This study would examine how households
allocate saving among different assets to achieve retirement goals, with particular
attention given to the use of mutual funds. The study would also identify the saving
attitudes and objectives across age groups, and gather information on tax-related issues,
such as the role of the features of defined contribution plans in affecting participation
and participant level of contributions.
Understanding Shareholder Redemption Decisions: This study would examine the
redemption behavior of shareholders in stock and bond funds since January 1994.
Several 1994 macro-economic developments make it an opportune time to conduct this
study: rising interest rates caused many investors to redeem bond fund shares, and the
devaluation of the Mexican peso caused many to sell shares of international and Latin
American funds.
Understanding Shareholder Perceptions of Mutual Fund Fees and Expenses: This
project would analyze shareholders’ awareness and understanding of various types of
mutual fund fees, including management fees, 12b(1) fees, exchange fees, redemption
fees, and service fees.
Technology and the Mutual Fund Industry: This project would catalog technological
changes in investor services and communications introduced over the last several years.
This information would be used as a starting point for addressing economic and
marketing issues involving services, products, and industry structure. After this research
is completed, shareholder receptivity to new services, products, and distribution methods
would be measured to identify the speed within which technological change may be able
to move through the industry.
In addition to the four Category 2 projects, which were also candidates for participant- funded
research, the Planning Subcommittee developed four other projects for Category 3:
Women Financial Decisionmakers: The key objective of this study would be to develop
benchmark research on the attitudes and needs of women investors.
Developing Institutional Markets for Mutual Funds: This study would survey the
financial officers of a sample of corporations, universities, and hospitals. The study
would determine their current allocation of investment assets, particularly the share held
in mutual funds, identify their investment selection process, the types of investment
advice sought, and whether outside money managers are ever used.
Use of Investment Professionals in Buying Mutual Funds: This project would review
past ICI research for any information from shareholders who use advisers about their use
of, perceptions of, and attitudes toward financial advisers.
Consumer Perceptions of the Mutual Fund Industry: This study would identify how
mutual fund owners and nonowners view the mutual fund industry relative to other
industries, determine the qualities that consumers associate with the mutual fund
industry, and identify the range of attitudes that consumers have about mutual funds.
Russ Haskell led ICI members in a discussion of each project idea, after which Sandy West
reviewed the voting procedures. Committee members were reminded that their priorities served
as a guide to ICI staff in setting the research agenda, and that the proposals submitted would be
evaluated in the context of FY96 resources. Members then took a few minutes to indicate their
project preferences by ballot.
IV. Review of Other Research
Anne Shafer apprised members that all data collection surveys were undergoing a comprehensive
review to identify their usefulness, cost, and number of staff members needed to complete the
survey. As a result, the annual source of sales collection, the annual tabulation of equity fund
portfolios, and the monthly survey of closed-end fund underwritings have been eliminated.
Kathy Rabon-Summers presented status reports for the pension statistics survey and the
international database.
V. Panel Discussions and Presentations
Members heard several panel discussions and presentations. Beth Segers of Fidelity, Ken
Rutherford of T. Rowe Price, and John Schniedwind of Benham each gave presentations related
to mutual fund risk measurement. Sandy West and John Rea described ICI’s current research on
shareholder perceptions of various risk measurements. Dick Marcis presented the key highlights
of a forthcoming ICI publication on shareholder responses to the 1994 market volatility. Paul
Stevens provided members with an update on ICI’s legal and legislative activities.