A:

It's natural for investors in a mutual fund to want to know how much the fund's management has invested in it. After all, they should have some of their own money in the fund if they expect you to pour in your hard-earned cash. Surprisingly, the mutual fund industry sees the disclosure of management ownership as superfluous. That's why you won't find the information in the prospectus mailed out to investors. This and other disclosures have been shunted to the Statement of Additional Information (SAI) - presumably to save space for glossy photos and full-page pie charts.

You have to request the S.A.I. from your fund company, but inside you'll find at least the partial answers you seek. The percentage of management ownership will be listed, but usually no names will be assigned to specific amounts. The exception would be if a manager owned a 5% stake, in which case he or she would be required to disclose that information. Unfortunately, mutual funds are so large that a 5% stake requires hundreds of millions, so its rare for a fund manager to qualify.

While you have the S.A.I., you can also look up handy information like the fund's history (was it ever a fund with a different name?), how performance data is calculated, and who controls the votes for voting securities.

The question that follows once you figure out how much the management owns is: "what does it mean?" This is a personal question, but most people would agree that it's a good sign for the fund manager to have a stake in the fund, thus providing an extra incentive to create shareholder value.

Read Digging Deeper: The Mutual Fund Prospectus to find out how to sidestep the legal jargon and find what really matters.

This question was answered by Andrew Beattie.

RELATED FAQS
  1. How do I calculate the loan-to-value ratio using Excel?

    Learn what a mutual fund and a money market fund are, and understand the differences between each and how they serve various ... Read Answer >>
  2. How much of a company's stock can a mutual fund own?

    There is no written rule that stipulates how much of a company a mutual fund can own. Instead, there are two major factors ... Read Answer >>
  3. How do I judge a mutual fund's performance?

    Evaluate mutual fund performance utilizing resources such as Morningstar; compare the fund with others in its peer group ... Read Answer >>
  4. What information should I focus on in my mutual fund's prospectus?

    Understand what information investors can find in a mutual fund prospectus and what they should focus on when reviewing the ... Read Answer >>
Related Articles
  1. Financial Advisor

    A Mutual Funds Guide for Young Investors

    Learn how mutual funds work, why they are so popular and how younger investors can get started by putting mutual funds in their IRAs or 401(k)s.
  2. Financial Advisor

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  3. Financial Advisor

    How to Rate Your Mutual Fund Manager

    What to really look for when you're deciding on a mutual fund.
  4. Investing

    When To Sell A Mutual Fund

    Unhappy with your mutual fund's returns and thinking of investing elsewhere? Read this article first.
  5. Financial Advisor

    This Is How Much Mutual Fund Managers Make

    Learn about the high-paying salaries of mutual fund managers and the low level of transparency in income reporting by mutual fund companies.
  6. Investing

    Has Your Fund Manager Been Through A Bear Market?

    How to find a portfolio that will survive when the bulls stop charging.
  7. Investing

    Mutual Funds Are Awesome - Except When They're Not

    This investment is very popular, but that doesn't mean it comes without risk.
  8. Investing

    Digging Deeper: The Mutual Fund Prospectus

    The legal jargon of this document can be daunting. Find out how to get to the important stuff.
  9. Investing

    4 Mistakes to Avoid When Choosing Mutual Funds to Invest in

    Mutual funds are a great way to build wealth but not all of them are the same. Investors have to be mindful of fees, turnover, redundancy and performance.
  10. Investing

    Looking to Buy Mutual Funds Online? Here Is How

    Learn how to buy mutual funds online; discover which websites offer mutual fund trading services, how to choose a fund and typical fees.
RELATED TERMS
  1. Statement of Additional Information - SAI

    A supplementary document to a mutual fund's prospectus that contains ...
  2. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  3. Investment Fund

    A supply of capital belonging to numerous investors that is used ...
  4. Fund Supermarkets

    An investment firm or brokerage that offers investors a wide ...
  5. Mutual Fund Yield

    Dividend payments divided by the value of a mutual fund’s shares. ...
  6. Funds Management

    The management of the cashflow of a financial institution. The ...
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center