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MGT604 - Management of Financial Institutions - Lecture Handout 23

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Mutual Funds

Criticism of managed mutual funds

Historically, only a small percentage of actively managed mutual funds, over long periods of time, have returned as much, or more than comparable index mutual funds. This, of course, is a criticism of one type of mutual fund over another.

  • Another criticism concerns sales commissions on load funds, an upfront or deferred fee as high as 8.5 percent of the amount invested in a fund (although the average upfront load is no more than 5% normally). *(Mutual Funds have to qualify to charge the maximum allowed by law, which is 8.5% and most of them DO NOT qualify for
  • In addition, no-load funds typically charge a 12b-1 fee in order to pay for shelf space on the exchange the investor uses for purchase of the fund, but they do not pay a load directly to a mutual fund broker, who sells it.
  • Critics point out those high sales commissions can sometimes represent a conflict of interest, as high commissions benefit the sales people but hurt the investors. Although in reality, "A shares", which appear to have the highest up front load, (around 5%) are the "cheapest" for the investor, if the investor is planning on 1) keeping the fund for more than 5 years, 2) investing more than 100,000 in one fund family, which likely will qualify them for "break points”, which is a form of discount, or 3) staying with that "fund family" for more than 5 years, but switching
    "funds" within the same fund company. In this case, the up front load is best for the client, and at times "outperforms" the "no load" or "B or C shares".
  • High commissions can sometimes cause sales people to recommend funds that maximize their income. This can be easily solved, buy working with a "registered investment advisor" instead of a "broker", where the investment advisor can charge strictly for advise, and not charge a "load, or commission" for their work, at all.

This is a discussion of criticism, and solutions regarding one mutual fund over another.12b- 1 fees, which are found on most "no load funds”, can motivate the fund company to focus on advertising to attract more and more new investors, as new investors would also cause the fund assets to increase, thus increasing the amount of money that the mutual fund
managers make.

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MGT613 - Production / Operations Management - Lecture Handout 26

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Related Content: MGT613 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Production & Operations Management


In this lecture we will look into detail TQM. We will initially focus on Six Sigma concept. We will try to understand six sigma concepts in terms of managerial and technical perspective. We will also try to understand the Deming Wheel of Quality and seven common tools of quality. And last but not the least we will also try to understand the concepts of statistical process control and benchmarking with respect to quality.

ISO Certifications

Quality Certification ensures that the organization has been able to achieve TQM philosophy. The two popular certifications which are pursued by the organizations include ISO 14000 and ISO 9000.

  1. ISO 14000: Is a set of international standards for assessing a company’s environmental performance.
  2. ISO 9000: Is a set of international standards on quality management and quality assurance, critical to international business.


Statistically speaking a process is said to be in Six Sigma stage if it does not have more than 3 or 4 defects per million. Most of the organizations, measure their quality program in terms of Six Sigma. Conceptually the Six Sigma Program is designed to reduce defects and requires the use of certain tools and techniques.

Six Sigma Programs are always directed towards quality improvement, cost cutting and time saving. Six Sigma Programs are employed in:

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