NEW YORK (CNN/Money) -
If ever there was a time for mutual-fund bigwigs to huddle, this is it.
The Morningstar Investment Conference -- one of the biggest gatherings of fund managers of the year -- kicks off in Chicago on Monday amid signs that shareholders are ready to revolt over everything from high fund expenses to disclosure on holdings to accounting blowups.
More than 1,000 fund managers, fund executives and investment advisers will attend Morningstar's 14th annual conference, as earnings warnings, the possibility of war in the Middle East and SEC investigations hammer an already pressured market.
"Restoring shareholder confidence will be an issue," said Robert Rodriguez, manager of FPA Capital and FPA New Income funds, who is one of the keynote speakers.
Tough times for mutual funds
How bad has it been? Fund returns have plummeted along with the Dow and the Nasdaq. Stock mutual funds were walloped in 2001, with their worst losses in 30 years. And 2000 wasn't any picnic, either. Virtually every type of stock fund suffered steep losses of 9 percent to as much as 33 percent.
Fund assets have remained relatively stable around $6.8 trillion -- but that's because investors have rushed out of stock funds and into safer bond and money market funds, according to the Investment Company Institute. Assets in stock funds dropped from a high of $4 trillion at the end of 1999 to $3.3 trillion as of April. Taxable bond fund assets rose from $541 billion in 1999 to $676 billion in April.
And that's not the half of it. On top of market losses, the Enron implosion scared the wits out of investors, and questions about accounting dogged stocks such as Tyco, a big holding of managers such as Bill Miller of Legg Mason Value Trust, and Robert Stansky of Fidelity Magellan. (Click here to read more about media-shy Stansky in MONEY.)
Indeed, market losses and a more conservative mood among investors have shaken up the top 20 mutual funds in 401(k) plans. Once dominated by high-flying growth funds, the list of funds with the most 401(k) assets is much tamer -- and considerably smaller -- than it was a year ago.
Even scarier? The realization that your fund might own a blowup stock and you don't know it because of loose reporting requirements. Throw in hefty annual fund fees and you get a population of fund investors who are ready to bolt.
But Rodriguez said it's natural that investors might feel sour since we're at the tail end of a nasty bear market.
"Some investors are thinking, maybe this is a rigged game and I don't want to play," Rodriguez said. "When you're going through a rough bear market, these are the things that happen."
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The conference, which runs Monday through Wednesday, will include sessions from some of Wall Street's most successful money managers.
John Bogle, a founder of Vanguard Group who preaches about the advantages of indexing, is another keynote speaker. Bogle for years has preached about the need for lower fees and other changes in the fund industry. More than two years ago, he was hollering about the need for reform to prevent the fund business from extinction.
Technology, which has taken a pounding since the Nasdaq's fall from grace in March 2000, will be another theme. Among the speakers are longtime tech bull Jim Oelschlager of White Oak Growth and Kevin Landis, of Firsthand Technology Value.
Growth managers will also explore what they learned when the tech bubble burst -- and where they see the best opportunities now. The speakers include Conrad Herrmann of Franklin Growth, Peter Trapp, of Needham Growth, and Ralph Wanger of Liberty Acorn.
Staff Writer Martine Costello will be at the Morningstar conference next week. You can e-mail her here.