Who’s who in mutual funds

Terms such as “mutual fund manufacturers,” “portfolio managers” and “mutual fund dealers” are thrown around a lot in the financial services industry. But what do these organizations actual do?

Here, we give you an overview of several key entities operating in the mutual funds complex in Canada.

Mutual Fund Manufacturer

Also called a “fund company” or “mutual fund company,” the mutual fund manufacturer is generally registered with the provincial securities commissions as an investment fund manager.  It is responsible for creating mutual funds and hiring the portfolio managers, as well as the company’s day-to-day operations.  The mutual fund manufacturer is also responsible for marketing its funds to the various distribution channels that will sell its mutual funds to retail investors.

Portfolio Manager

The portfolio manager is responsible for making investment decisions on behalf of a mutual fund, including purchasing and selling securities and determining the mix of assets. The portfolio manager is guided by the mutual fund’s investment objectives as stated in the prospectus. The investment fund manager and the portfolio manager are frequently affiliates, but may also be separate entities.

Mutual Fund Dealer

Mutual fund dealers are one of the primary distribution/sales channels for mutual funds. These firms have a network of advisors and/or financial planners that work with investors to make sound investment choices. All mutual fund dealers outside the province of Québec are required to be members of the Mutual Fund Dealers Association of Canada (MFDA).

Investment Dealer

Mutual funds may also be distributed through investment dealers who can offer a broad array of investment products other than mutual funds – like stocks, bonds, private equity products, etc. These dealers are regulated by the Investment Industry Regulatory Organization of Canada (IIROC).

It should be noted that both IIROC and the MFDA aren’t government agencies – they are “self-regulatory organizations” that operate under the authority of the provincial securities commissions.

Custodian

To protect investors, by law, the assets of a mutual fund must be kept separate from those of the investment fund manager. The custodian fulfils this responsibility by safekeeping the cash and securities belonging to the mutual fund. The custodian is also responsible for holding the income earned by the mutual fund until it is reinvested or distributed to investors.

Transfer Agent

The transfer agent maintains the register of unitholders and records all transfers of ownership. This register changes daily as mutual fund units are purchased and redeemed. The transfer agent may also offer a dividend distribution service.

Putting it all together

If you’re interested in learning more about who’s who in mutual funds, you can gain an overview of the entire investment landscape by registering for our Canadian Investment Funds Course or the Canadian Investment Funds Operations Course.

Sources: https://investorcentre.ific.ca/oversees-investment-funds-industry/