The mutual fund industry began in 1924 with the formation of a truly mutual mutual fund: one organized, operated, and managed, not by a separate management. company with its own commercial interests, but by its own trustees; compensated not on the basis of the trust's principal, but, under traditional fiduciary standards, its income. This model of the mutual fund (the Alpha model) has been replaced by the mutual fund complex of 2004 (the Omega model). Although most mutual funds utilize this model, this Essay argues it is contrary to the intent and language of the Investment Company Act of 1940 as it benefits managers and directors as opposed to shareholders. This Essay compares the actual benefit to shareholders from funds utilizing the Omega model versus those using the Alpha model and proposes it is time to return to the Alpha model of 1924.
John C. Bogle, Re-Mutualizing the Mutual fund Industry-The Alpha and the Omega, 45 B.C.L. Rev. 391 (2004), http://lawdigitalcommons.bc.edu/bclr/vol45/iss2/3