ratio of 70%. There are two principal kinds of REITs. Equity trusts invest in real estate directly, whereas mortgage trusts invest primarily in mortgage and construction loans. REITs gen- erally are established by banks, insurance companies, or mortgage companies, which then serve as investment managers to earn a fee. REITs are exempt from taxes as long as at least 95% of their taxable income is dis- tributed to shareholders. For shareholders, however, the dividends are taxable as personal income.       4.3 MUTUAL FUNDS   Mutual funds are the common name for open-end investment companies. This is the dom- inant investment company today, accounting for roughly 90% of investment company as- sets. Assets under management in the mutual fund industry surpassed $6.8 trillion by the end of 1999.     Investment Policies   Each mutual fund has a specified investment policy, which is described in the funds prospectus. For example, money market mutual funds hold the short-term, low-risk instru- ments of the money market (see Chapter 2 for a review of these securities), while bond funds hold fixed-income securities. Some funds have even more narrowly defined man- dates. For example, some fixed-income funds will hold primarily Treasury bonds, others primarily mortgage-backed securities. Management companies manage a family, or "complex," of mutual funds. They orga- nize an entire collection of funds and then collect a management fee for operating them. By managing a collection of funds under one umbrella, these companies make it easy for in- vestors to allocate assets across market sectors and to switch assets across funds while still benefiting from centralized record keeping. Some of the most well-known management companies are Fidelity, Vanguard, Putnam, and Dreyfus. Each offers an array of open-end mutual funds with different investment policies. There were nearly 7,800 mutual funds at the end of 1999, which were offered by only 433 fund complexes. Some of the more important fund types, classified by investment policy, are discussed next.   Money Market Funds These funds invest in money market securities. They usually offer check-writing features, and net asset value is fixed at $1 per share, so that there are no tax implications such as capital gains or losses associated with redemption of shares. I. Introduction 4. Mutual Funds and Other Investment Companies The McGraw−Hill Companies, 2001           CHAPTER 4 Mutual Funds and Other Investment Companies