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 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 >>
  3. How do you find out the price of a mutual fund?

    The easiest way to find out the price of a mutual fund is to look at its net asset value (NAV). NAV is the total value of ... 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. Investing

    What You Need to Know About Mutual Funds

    Mutual funds are a good investment opportunity, but investors should know how they operate.
  3. Financial Advisor

    How to Rate Your Mutual Fund Manager

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

    When To Sell A Mutual Fund

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

    The Benefits of Picking Mutual Funds Over Individual Stocks

    Learn about the advantages of investing in mutual funds rather than individual stocks, including the benefits of affordability, oversight and diversification.
  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.
RELATED TERMS
  1. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  2. Mutual Fund Yield

    Dividend payments divided by the value of a mutual fund’s shares. ...
  3. Fund Supermarkets

    An investment firm or brokerage that offers investors a wide ...
  4. Pooled Funds

    Funds from many individual investors that are aggregated for ...
  5. Mutual Fund Custodian

    A trust company, bank or similar financial institution responsible ...
  6. Total Annual Fund Operating Expenses

    For a mutual fund or other type of fund management structure, ...
Hot Definitions
  1. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that eventually eliminated tariffs to encourage economic activity between the United ...
  2. Agency Theory

    A supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving ...
  3. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations ...
  4. Index

    A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is a hypothetical ...
  5. Return on Market Value of Equity - ROME

    Return on market value of equity (ROME) is a comparative measure typically used by analysts to identify companies that generate ...
  6. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding shares. The majority shareholder is often the founder ...
Trading Center