Does one reduce risk by investing in mutual funds held by different groups?
This is not my area of expertise, but I think it’s probably extra hassle for not much benefit. I say this for two reasons: 1. Firms like Fidelity and Vanguard generally do not have highly-leveraged balance sheets that could cause them to fail dramatically. Firms like Bear Stearns and Lehman Brothers were engaged in market-making, securities underwriting and proprietary trading for their own account. Those are the type of activities that require a firm to puts its own capital at risk. Pure asset managers do not generally do this sort of thing. 2. While it’s sensible for you to want to diversify your counter-parties, if you do this you are probably needlessly replicating what these firms are already doing themselves. Because of all the madness surrounding the Bear/Lehman failures, every serious investment firm has conducted a massive review of its counter-party and prime brokerage relationships. Firms the size of Fidelity and Vanguard probably spread their business to every single solven
