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Chapter 8. Mutual Funds: Performance > Mutual Fund Managers Are Superior Invest...

Mutual Fund Managers Are Superior Investors

The investment industry is now dominated by a self-policing agency called the Association of Investment Management Research (AIMR). This organization sponsors a designation called the Chartered Financial Analyst, or CFA. The CFA is to the investment industry what the CPA is to the accounting industry. The AIMR Web site boasts over 40,000 CFA holders for 2001. A quarter of these are working in the mutual fund industry. There are another 65,000 aspiring CFA candidates who are in the process of earning a CFA designation. The process entails passing three comprehensive exams covering finance, economics, accounting, statistics, and ethics. The exams are not easy; the pass rate for the first two tests is typically less than 50%. All of the tests are given together once during the year. Therefore, it takes three years to take all three—if you pass them on the first try. The process takes longer for those who do not study enough! The CFA designation is now practically mandatory for attaining the higher level investment positions with mutual funds, investment banks, and brokerage firms. In short, mutual fund managers are highly trained.

Mutual fund companies have access to the best investment information and news services available. They also typically have the best technology: computer hardware and software tools. In other words, mutual fund managers not only have good training, they also have the tools to apply their knowledge. Also important is that they have the time to fully follow the market.


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