Fox Your World with Neil Cavuto - Transcript

Fox News Network

SHOW: YOUR WORLD WITH NEIL CAVUTO (16:00)

HEADLINE: Interview With Peter Fitzgerald, Susan Collins

GUESTS: Peter Fitzgerald, Susan Collins

BYLINE: Terry Keenan

BODY:
TERRY KEENAN, GUEST HOST: Is your mutual fund giving you a fair shake? Well, if you're not so sure, my next guests say they don't blame you. That's why they're trying to pass a law they promise will protect you and your investments.

Joining me now from Capitol Hill, Republican senators Peter Fitzgerald of Illinois and Susan Collins of Maine. And senators, welcome to you both.

Senator Fitzgerald, let me start with you. Mutual fund investors have been battered by illegal trading, excessive fees, improper disclosure, all of it. Especially coming to light if in the last year or so. How would your bill address these issues?

SEN. PETER FITZGERALD ®, ILLINOIS: Well, Terry, our bill would address those issues in a very free market way. Obviously, we would ban some of the unseemly practices like light trading and market timing. But mainly we're just enhancing the transparency and the disclosure.

Funds would have to disclose all their costs to investors, and it would make it easier for investors to compare funds based on cost. It is very important for investors to look at the fees they are being charged. A one percent fee can cut away 35 to 40 percent of your retirement savings over a lifetime of investing. So we address it in a free market way by enhancing disclosure and transparency, and banning some of the unsavory practices that have come to light.

KEENAN: Senator Collins, Eliot Spitzer, our attorney general up here in New York, has said that his greatest fear is that mutual fund lobbyists are going to drive to the heart of any sort of reform bill and make sure that there isn't any limitation on fee reform. That is his biggest worry.

Your bill would address that I assume?

SEN. SUSAN COLLINS ®, MAINE: It would indeed. I think it's important to realize that, while all of the illegal practices that have been uncovered are certainly unacceptable, that for the average investor, the excessive fees, the hidden costs may well have even more of an impact on the ultimate return that that investor earns. So we're very committed to getting this legislation through.

It is a bipartisan bill based on hearings that Senator Fitzgerald held. And I'm hope full that it will garner considerable support.

KEENAN: Senator Fitzgerald, the mutual fund industry-and I've talked to some fund managers who would say, you know, you break your leg, you go to the best doctor. You pay more for that doctor. You pay less for a doctor that isn't so good. So why shouldn't you pay more for a better fund and less for a not good fund?

FITZGERALD: Well, for a very simple reason, Terry. Eighty-eight percent of mutual funds under-perform the market. So chances are, if you are paying a lot of extra fees because you think you have got some hot-shot manage of your funds assets, over time, chances are that fund will revert to the mean and probably under-perform the market.

So investors really should look at the fees they are being charged. There are a few great managers out there. Bill Miller, for example, at Legg Mason has beat the Standard & Poor's 500 Index for 13 years in a row. But that gets very hard to replicate over time. And all this academic studies show that fees are very, very important.

Our bill, importantly, is endorsed by John Bogle, founder of Vanguard, who is probably the nation's leading expert on mutual funds. He's called our bill the gold standard of reform.

KEENAN: A pretty good endorsement coming from John Bogle. We're going to have to leave it there. But thanks to you both, Senator Peter Fitzgerald and Senator Susan Collins.