Thanks in no small part to a presidential election, a lingering fiscal cliff, and turmoil abroad, 2012 has been a volatile year for the mutual fund industry. While not many people emerged completely unscathed from the roller coaster ride, some clearly did better than others. Here's a look at this year's winners:
Bond funds. As nervous investors pull out of the stock market, bond funds have been soaking up money. Through the end of October, assets in taxable bond funds had increased by more than $224 billion this year, according to the Investment Company Institute. Large, trusted names have been the biggest beneficiaries of this trend. For instance, through the end of September, DoubleLine Total Return Bond, managed by bond pro Jeffrey Gundlach, had brought in net inflows totaling $16 billion.
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Index fund investors. A number of popular providers lowered fees on their index products this year in an effort to undercut competitors' prices. Most recently, Fidelity reduced prices for 22 of its index mutual funds. Exchange-traded fund investors benefitted most from this year's price wars, with BlackRock, Vanguard, and Charles Schwab all entering the fray by announcing lower expense ratios. Take, for instance, the Schwab U.S. Broad Market ETF, which now boasts an expense ratio of 0.04 percent. The debate over the merits of active versus passive investing continues, but one thing is clear: This year, indexing got significantly cheaper.
The Fairholme Fund. After years of stellar performance, the Fairholme Fund tanked in 2011, losing a whopping 32 percent even as the S&P 500 finished the year in the black. This year, however, things are back to normal. Veteran manager Bruce Berkowitz has remained confident in the financial services sector, and his steely discipline has paid off. As of the end of August, Berkowitz had a whopping 37 percent of the fund's portfolio invested in AIG, a position that has resulted in a handsome reward for the fund's investors. Bank of America has also been a contributor to the fund's success this year. Through Thursday, the fund was up 37 percent year to date.
[Read: Understanding Your Mutual Funds' Portfolios]
401(k) investors. Investors saving for retirement now have access to more information. Under new Department of Labor rules, employers now have to provide additional information about 401(k) fees. These rules seek to increase transparency by letting investors know where their money is going. The changes went into effect earlier this year. While the rules look good on paper, though, their effect on transparency will be incremental. As ABC News reported earlier this year, plan providers are "testing the regulatory waters by disclosing fees in account statements in less-than-transparent ways, making it extremely difficult for employees to figure them out." But even though there are still kinks to be worked out, the new rules still earn themselves a spot in the win column.
The mutual fund lobby. Mutual fund providers, with backing from the Investment Company Institute and the Chamber of Commerce, managed to forestall any changes to the structure of money market funds--at least for now. Mary Schapiro, who recently stepped down from her post as chairman of the SEC, had pushed hard for requirements that money market funds either increase their capital buffers or float their net asset values. Under the latter option, money market funds would no longer have their signature $1-per-share prices.
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Schapiro's proposal, which triggered strong opposition from representatives of the fund industry, lost steam after Commissioner Luis Aguilar expressed doubts, thereby depriving Schapiro of her swing vote. Since then, however, the Financial Stability Oversight Council has encouraged reform, and Aguilar has signaled his willingness to play ball. As a result, the industry's victory could be fleeting.
