Mfs Investment Management: What Went Wrong?

MFS Investment Management (MFS) is an American-based global investment manager that was founded in 1924. It is one of the oldest asset management companies in the world and is credited with pioneering the mutual fund. MFS has had a long and eventful history since its inception, including a major shift in top management following the death of its Chairman and CEO, A. Keith Brodkin, in 1998, and a wide-ranging investigation in the early 2000s that resulted in a $350 million settlement to address concerns of regulators and lawmakers. Despite these challenges, MFS has grown significantly over the years, with assets under management increasing from $55 billion in 1997 to $626.4 billion as of October 31, 2024. The company offers a wide range of investment services and products to institutional investors and investment professionals, including mutual funds, variable insurance, and institutional trusts. With its global presence and long-standing reputation, MFS continues to be a significant player in the investment management industry.

MFS Investment Management's history and origins

MFS Investment Management, formerly known as Massachusetts Financial Services, is an American-based global investment manager. It was founded in 1924 by Sherman Adams, Charles H. Learoyd, and Ashton L. Carr, and is one of the oldest asset management companies in the world.

The company's first fund was the Massachusetts Investors Trust (MIT), created with $50,000 in assets at the company's inception. MIT was the first mutual fund in America and is still in operation today. Over the next five years, the company expanded its assets to $14 million. During the stock market crash of 1929, the fund survived an 83% loss and created a second fund in 1934. By 1959, MIT had become the largest mutual fund in the United States.

In 1969, the company began offering a broader range of products and services and was reorganised as Massachusetts Financial Services. In the same year, MIT was renamed Massachusetts Financial Services (MFS) to reflect the company's expanded scope. In 1976, MFS offered one of the nation's first national municipal bond funds, and in 1981, it launched the country's first globally diversified fixed-income fund.

In 1982, the company was acquired by Sun Life Financial of Canada and became known as MFS Investment Management. MFS Investment Management is now the parent company of other investment management companies, collectively known as the MFS Global Group.

The company's ownership and subsidiaries

MFS Investment Management, formerly known as Massachusetts Financial Services, is an American-based global investment manager. It was founded in 1924 and is one of the oldest asset management companies in the world.

In 1982, the company was acquired by Sun Life Financial of Canada, and MFS is still owned by Sun Life Financial, a publicly traded financial services company. MFS Investment Management is the parent company of other investment management companies, which are collectively known as MFS Global Group.

MFS has more than 2,100 employees worldwide and nearly $500 billion in assets under management. The firm ranked as the 46th largest asset manager globally, according to Cerulli Associates, and 9th largest U.S. long-term mutual fund manager, according to research firm ISS Market Intelligence.

MFS offers a wide range of investment services and products to institutional investors and investment professionals. The company has a family of more than 80 U.S. mutual funds. Other products it provides include variable insurance, closed-end funds, institutional trusts and 529 college planning.

MFS Institutional Advisors, Inc. manages equity and fixed-income assets for a global client base that includes public pension plans, corporate pension plans, insurance companies, sovereign wealth funds, endowments and foundations, multi-employer plans, and investment advisory firms.

MFS offers the Meridian Funds, a line of 39 mutual funds available through financial intermediaries to non-U.S. investors. MFS is also among the largest asset managers of insurance assets in the US through its Variable Insurance Trust (VIT) funds.

The firm’s global research platform includes approximately 300 investment professionals in investment offices at its headquarters in Boston and in offices in Hong Kong, London, Luxembourg, Singapore, São Paulo, Sydney, Tokyo and Toronto.

The services and products offered

MFS Investment Management (MFS), formerly known as Massachusetts Financial Services, is an American-based global investment manager. It was founded in 1924 and is one of the oldest asset management companies in the world. MFS has been credited with pioneering the mutual fund with the creation of the Massachusetts Investors Trust fund, which is still in operation today.

Services and Products Offered

MFS offers a wide range of investment services and products to institutional investors and investment professionals. Here is a detailed list of their offerings:

• The company has a family of more than 80 U.S. mutual funds, which are distributed through financial advisors and institutions such as brokerage houses, financial planning firms, and independent advisors.
• MFS offers variable insurance products, including the Variable Insurance Portfolio, Variable Insurance Portfolio II, and Variable Insurance Portfolio III. These products are designed to provide investment options within insurance policies, such as variable universal life insurance or variable annuities.
• MFS provides separately managed accounts, allowing clients to have a customized portfolio managed by MFS's investment professionals.
• The firm offers institutional trusts, which are investment funds designed for institutional clients such as pension plans, endowments, and foundations.
• MFS assists with 529 college planning, helping clients save for education expenses.
• The company launched the Meridian Funds, a line of 39 mutual funds available exclusively to non-U.S. investors through financial intermediaries.
• MFS is a significant asset manager of insurance assets in the U.S. through its Variable Insurance Trust (VIT) funds.
• They offer closed-end funds, which are investment funds that are raised through an initial public offering and then listed and traded on a stock exchange.
• MFS provides global research and collaboration between its investment teams worldwide, utilizing its global research platform.
• The firm offers separate account portfolio management for institutional investors, overseeing both equity and fixed-income assets.
• MFS takes a long-term approach to investing and emphasizes active management, focusing on improving investment outcomes and engaging with portfolio companies and issuers.
• The company has created "outcome-oriented" products, such as target-risk and target-date investment strategies, which aim to provide specific investment outcomes for clients.
• MFS assists institutional clients with managing equity and fixed-income assets, including public pension plans, corporate pension plans, insurance companies, and sovereign wealth funds.

MFS's investment philosophy and approach

MFS Investment Management, formerly known as Massachusetts Financial Services, is an American-based global investment manager. Founded in 1924, MFS is one of the oldest asset management companies in the world and has been credited with pioneering the mutual fund.

A key aspect of MFS's approach is their integrated research. They utilise a global research platform to facilitate collaboration between their investment teams worldwide, allowing them to develop local market perspectives and share information across sectors, geographies, and asset classes. This integrated research helps MFS determine opportunities to exploit the market and create value, as they believe the markets are fundamentally inefficient.

MFS also prioritises risk management in its investment approach. They have a risk-aware culture where risk plays a central role in decision-making, and everyone takes responsibility for assessing it. Their robust, integrated research helps them understand material risks, including ESG issues, to make informed decisions and mitigate risks that could impact a company's competitive advantage. Additionally, MFS focuses on long-term discipline, favouring ESG integration and engagement, and emphasising continuity and succession planning to develop talent for future leadership and investment teams.

Regulatory disclosures and fines

MFS Investment Management (formerly Massachusetts Financial Services) has been involved in several regulatory disclosures and fines over the years. In 2003, the company was investigated by Massachusetts and New Hampshire regulators as part of a wider probe into the mutual fund industry in Boston. The Securities and Exchange Commission (SEC) alleged that MFS made false and misleading statements in its fund prospectus concerning its policy on market trading and timing. MFS paid $350 million to settle state and federal fraud charges.

Following this scandal, MFS implemented a series of company reforms to increase transparency and address regulatory concerns. These changes included informing investors about fees, maintaining the independence of fund boards, and creating deterrents to market timing. The reforms also ended the "soft-dollar" arrangements, which allowed the exchange of brokerage commissions for market research and data.

In 2018, MFS Investment Management was fined $1.9 million by the SEC. The company allegedly distributed research to institutional clients and prospective clients that contained "material misstatements and commissions." This fine was a result of regulatory disclosures made on the company's Form ADV paperwork filed with the SEC.

Frequently asked questions