http://aolsvc.news.aol.com/business/article.adp?id=20041106022409990007Updated: 08:34 AM EST
No Bonanza for Funds Seen in Social Security Reform
By Herbert Lash, Reuters
NEW YORK (Nov. 6) - The bonanza many believe President Bush has handed the mutual fund industry with his plans to reform Social Security may be a mirage, industry leaders said on Friday.
How workers will be allowed to invest some of their payroll taxes in the stock market is far from clear, but there is a presumption it will be windfall for an industry that manages the nest eggs of about 95 million Americans.
The administrative costs for managing accounts that for the most part will hold less than $1,000 in the first year suggests mutual fund companies could easily lose money for at least several years, industry experts said.
"It is not clear that if you have private accounts that this will be a bonanza to the mutual fund industry," said Robert Pozens, chairman of MFS Investment Management in Boston. "If certain design decisions are made, it might turn out to be a very difficult place to make a profit."
Pozens also said he believed Congress might try to guarantee returns for investors, which would slap an obligation on the government the accounts are trying to ease.
Because of the small size of most accounts, it will probably take five years to get the system off the ground and be a size that is reasonable for the private sector, he said.
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