Fund Performance Linked to Management Ownership

When researching mutual funds to invest client funds, we evaluate numerous aspects including (just to name a few):

  • corporate culture
  • manager experience
  • compensation
  • research philosophy
  • expenses
  • management ownership

Naturally, one of our primary concerns is that fund managers have their interests aligned with those of shareholders.

In our view we find one of the best measures of this to be if managers invest significantly in their own funds. Consistent with recent studies by Morningstar, this also seems to be indicative of better performance.

The recent issue of Investment News details these findings:

“…funds whose managers invest $1 million or more of their own money in their fund ranked in the 42nd performance percentile, on average, over the five-year period through July. That means they outperformed 58% of their peers.”


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