Fads and foibles in the fund industry

A look back at the fund industry's path since Morningstar's 1984 founding

John Rekenthaler 28 May, 2009 | 12:28PM
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As Morningstar celebrates 25 years in business, Vice President of Research John Rekenthaler gives a lesson in the fund industry's history in the United States.

In 1984, when Morningstar began operations, US stock and bond mutual fund assets had just crossed the $200 billion mark. That figure would double during the next two years, which gave Morningstar a nice boost as a fledgling research company. Fund industry assets would eventually peak at nearly $10 trillion in 2007, before sliding back to about $7 trillion today.

Most of the monies in the early days flowed into so-called "government guaranteed" funds--government bond funds that paid much higher yields than cash, and whose "guaranteed" labels often fooled investors into believing they could not lose money. But lose money they most certainly could--and did in early 1987, when interest rates rose. Shortly after that debacle, the SEC banned the use of the word "guaranteed" in a mutual fund's label.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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John Rekenthaler

John Rekenthaler  is vice president of research for Morningstar.