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It costs money to run a mutual fund. In the era when anybody could run a mutual fund, questions like, "Will we get paid to do this?" didn't play much of a role. Now, however, we will begin to see many of the 10,000 funds disappear because their expense structures leave their managers making nothing, and nobody works for free in financial services.

Why should you care about the mass closings that are coming? Because when a mutual fund closes, it sells all of its stocks. You are seeing that pressure

right now

! Of course, of the hundreds of firms I expect to close because the managers can't make a living anymore, most of them will be in concentrated in Net infrastructure and telecommunications and equipment.

You may not know how bad it can be for a fund manager when things go wrong. So, having been one, I will fill you in. As a hedge fund manager we had two streams of income: the profits from our capital gains (realized and unrealized) and the money from our 1% management fee which was used to pay wages and incidental expenses that could not be "soft-dollared," or paid by generating commissions that were then earmarked for certain research services.

In 1998, I was so embarrassed by my plus-2% performance that I waived my 1% fee. In retrospect it was probably stupid. Nobody asked me to do it. I thought it was honorable, but the scorn from that "bad" year wasn't diminished one whit and the press I received would have driven most to an early grave.

What hurt, though, was without the 1% I had to pay everybody out of my own pocket. I just ate everybody's salary. I may be a wealthy guy, but you can't do that too often before you run out of money.

That's what is happening now at a lot of these funds. No, they are not waiving their fees -- although they sure should be, given how badly they are doing. But the assets have shrunk to the point that they can't pay their bills. So they do what any business person does when he can't pay the bills. They close. And that's where the new level of pressure in the stock market is coming from.

I continue to expect the pressure to build in the "sector funds" that remain, as the managers realize they simply can't make a living running other people's money anymore.

James J. Cramer is a director and co-founder of He contributes daily market commentary for's sites and serves as an adviser to the company's CEO. Outside contributing columnists for and, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to