Mutual funds originated in the US and were introduced to the UK by M&G in the 1930’s. Mutual Funds are the US equivalent of unit trusts and are ‘open ended’, which means that the number of shares or units in the fund is not fixed but varies according to investor demand. Also, the price of the fund always faithfully reflects the value of the underlying assets – equities, bonds and so on. Mutual funds are strictly regulated, in fact more stringently than either pension funds or insurance companies.

Mutual fund managers are under constant pressure from their marketing colleagues who need to show a good performance to sell additional units. The manager also has to contend with the well-known retail investor syndicate, Investors pile in when share prices are going up and sell when they go down – when they should be doing the reverse! The result of this is that mutual fund managers trade more than pension fund and in insurance fund managers, which means that they have disproportionately greater influence on the equity market than the ownership share would imply.