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Do Managers of 50 Top Funds Buy What They're Selling?

When it comes to their own funds, some managers invest millions and others invest bupkis.

Russel Kinnel, 03/08/2011

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One of the best data points on mutual funds is manager ownership of fund shares. Fund companies have to report to the SEC annually how much managers have invested in their funds.

The report is in the pithily named Statement of Additional Information, or form 485bpos. There, the manager's investments are published in ranges with a maximum level of more than $1 million. That maximum level is too low, as many managers earn in the $5 million to $20 million range, but it's still helpful in understanding which managers really believe in their funds.

Fully 4,347 funds out of about 6,557 have at least one manager who isn't investing in the fund. And of the 1,126 funds where there is just one manager, there is no manager ownership. On the plus side, 564 funds have at least one manager with more than $1 million at stake in the fund they run.

I took a look at the 50 largest actively managed funds to shed further light on how well the fund industry has aligned its interests with shareholders'. This is a group where nearly all the funds are core, managers are generally well-compensated, and most managers are quite experienced. In short, there are very few funds in this group with a good excuse for managers not meeting the $1 million and over mark.

Managers Buy In
Overall, the results are encouraging. Fully 39 of the 50 report at least one manager who has topped the $1 million mark. While I can find a lot of fund companies and managers falling short when I move down to smaller funds, top managers really do buy in.

In fact, all of the 19 largest funds have managers with investments greater than $1 million. Among the most impressive were Dodge & Cox Stock DODGX, where seven managers have more than $1 million invested, and American Funds Growth Fund of America AGTHX, where six managers have more than $1 million in their fund.

Reviewing the Exceptions
Let's take a look at the funds that fell short of a $1 million manager investment.

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