Tuesday, June 17, 2008

How come Mutual Fund Managers don’t invest in their own funds?

Once again, an article highlights that the majority of mutual fund managers avoid their own funds. Why would a customer want to buy fund when the manager won’t touch it?

Maybe the manager knows that the expense fees in most mutual funds eat you alive over time, and most knowledgeable investors are better off investing directly in stocks. John Bogle, the former chairman of Vanguard group, talks about this trend in his discussion about the “The Battle for the Soul of Capitalism”.

Morningstar reported that 47% of the managers of U.S. stock funds reported no ownership in their own funds. 61% of the managers of foreign stock funds and 66% of taxable bond funds do not own their funds. Similarly 71% of the managers of balanced funds will not include the funds in their holdings.

Do they know the funds are so toxic or poorly run that these managers will not even pick up a small number of fund shares – maybe this would be a good display of confidence.

Once again this is a dismal reflection of the mutual fund industry, and demonstrates that many managers do not believe their “gimmicky market-driven funds” are designed for the long haul. Investors should focus on low fees when investing in mutual funds and take a look if the manager actually holds shares.


Anonymous said...

Hi Greg,
Any favourite funds of yours where you do know that the manager personally owns shares?
thanks !