Empire of the Fund is an investigation of the way we save now. With the rise of the 401(k) and the demise of the pension, the United States has embarked upon the richest and riskiest experiment in our financial history. Over the next twenty years, nearly eighty million baby boomers will retire at a pace of ten thousand per day. The hypothesis of our experiment is that millions of ordinary, untrained, busy citizens can successfully manage trillions of dollars in a financial system dominated by wealthy, skilled, and powerful financial institutions, many of which have a record of treating individual investors shabbily.
The key tools in our 401(k) plans and individual retirement accounts are mutual funds, which have ballooned to hold more than $16 trillion. But these funds pose dangers to our savings in three ways: through structural vulnerabilities that give money managers the incentive to focus on marketing over investing; through the all-too-human challenges of managing our savings decades into the future; and through the peril of financial professionals behaving badly, to our economic harm.
Though Americans often hear of the importance of low fees in fund investing, few are aware of the panoply of ways that some financial advisers have illegally diverted money out of mutual funds: from abetting hedge funds in trading after the legal deadline, to inflating the assets on which they are paid a percentage, to paying kickbacks for brokers to sell their funds. This book forewarns and forearms Americans by illustrating the built-in flaws, perverse incentives, and litany of scandals that have bedeviled mutual funds.
And by setting forth a pair of policy solutions to improve Americans’ financial literacy and bargaining power, it also attempts to safeguard our individual financial destinies and our nation’s fiscal strength.
Empire of the Fund: the Way We Save Now
“Empire of the Fund is a clear-eyed look at the problems and scandals that have beset the mutual fund -- the very industry Americans trust to ensure our financial futures. And Birdthistle has a plan for reforming how we save." — Bethany McLean, author of The Smartest Guys in the Room and All the Devils Are Here
"It’s hard to believe the phrases 'entertainingly written' and 'mutual funds' go in the same sentence, but William Birdthistle manages this feat in Empire of the Fund. An urgent must read for anyone interested in retirement policy, investment history and how it all went wrong for so many Americans." — Helaine Olen, author of Pound Foolish and The Index Card
“William Birdthistle is not only one of the leading experts on mutual funds—he is also a superb writer. His sharp wit and science-driven wisdom glide elegantly across the page as he teaches investors how to make sense of America’s most common—and most baffling—investment vehicles.” — John Morley, Yale Law School
“In Empire of the Fund, Professor William Birdthistle tackles one of the most difficult policy questions in the American economy: what role will mutual funds play in our increasingly complex financial future? It is, in many ways, a terrifying question. As Birdthistle convincingly argues, we are a nation of investing amateurs. Most Americans do a poor job of managing our money, even as we pile into a variety of fund alternatives. As a result, we often fall victim to numerous ‘diseases and disorders’ in the mutual fund industry. Birdthistle colorfully traces the history of problems with mutual funds, and he explains the potential benefits and drawbacks of alternatives. His recommendations for strengthening mutual funds are provocative and tightly argued, and include both financial licensing requirements and more rigorous enforcement. This book is a must-read for anyone who wants to understand the dangers—and potential benefits—in this important part of the financial markets.” — Frank Partnoy, University of San Diego School of Law, and author of F.I.A.S.C.O. and Wait: The Art and Science of Delay
"Professor William Birdthistle has written a wonderful book. Drawing on the law, Empire of the Fund tells the story of mutual funds, pension funds investments, and financial savings. This is not a book on how to invest; it is a book on how investments work and the problems they pose. It is an accurate description of a complex subject, based on in-depth research. It is interesting, understandable to the non- professional, and delightful reading. The discussion is laced with humor, anecdotes derived from court cases, and lessons that become obvious. If anyone had doubts that investments can be explained accurately in a non-simplistic way, this book has dispelled these doubts. Today, so many rely on their invested savings. Enabling any reader to understand the legal problems posed by their investments is a remarkable achievement. Not only should non-professionals read it—professionals, whether practicing lawyers or teachers, can benefit from reading this book and learning from it.” — Tamar Frankel, Boston University School of Law, and author of The Ponzi Scheme Puzzle
“Empire of the Fund provides an engaging, thorough review of the mysterious multi-trillion dollar mutual fund industry. Leading investment law expert, William Birdthistle diagnoses what's ailing our funds and how we can heal them. This book provides a necessary first step to improve financial literacy so investors have the knowledge and tools to secure better options for their retirement savings.” — Jennifer Taub, Vermont Law School, and author of Other People's Houses
“The mutual fund industry has been the prime beneficiary of the radical change in our nation's retirement system during the past quarter century. But funds are afflicted by diseases and disorders, by faults and foibles, brilliantly catalogued in Empire of the Fund. No investor can afford to ignore the message of this book: educate yourself and gain financial literacy.” — John C. Bogle, founder of The Vanguard Group & author of The Little Book of Common Sense Investing
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“The mutual fund industry has been the prime beneficiary of the radical change in our nation's retirement system during the past quarter century. But funds are afflicted by diseases and disorders, by faults and foibles, brilliantly catalogued in Empire of the Fund. No investor can afford to ignore the message of this book: educate yourself and gain financial literacy.”
— John C. Bogle, founder of The Vanguard Group & author of The Little Book of Common Sense Investing