Retail mutual funds, which continue to be widely used by Registered Investment Advisors (RIAs), are susceptible to hidden risks that make them more costly than they first appear, according to a white paper released by Gurtin Fixed Income Management.
Gurtin's white paper, "The Hidden Risks of Retail Mutual Funds for RIA Clients,” reveals that retail investors' poor market timing leads to fund flows that negatively impact performance, while transaction costs associated with fund flows unfairly impact buy-and-hold investors. In addition, risks and costs are amplified for municipal mutual funds.
"Mutual fund investors would benefit from separately managed accounts and mutual funds accessible exclusively through RIAs, which protect investments from retail fund flows," says Bill Gurtin, CEO and CIO at Gurtin Fixed Income. "These alternatives offer protection through access to professional management without compromising managerial discretion to accommodate fund flows, as well as through carefully chosen co-investors whose investment behaviours more closely mirror patient institutional capital."