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 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 >>
  2. 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 >>
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

    How to Rate Your Mutual Fund Manager

    What to really look for when you're deciding on a mutual fund.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. Investing

    Are Mutual Funds A Relic?

    We list some options other than mutual funds for your retirement plan.
  8. Financial Advisor

    5 Secrets You Didn’t Know About Mutual Funds

    Learn five of the "secrets" about mutual funds that can have a significant impact on mutual fund choices and investor profitability.
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. Mutual Fund Yield

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

    An investment firm or brokerage that offers investors a wide ...
  6. Index Fund

    An index fund is a type of mutual fund with a portfolio constructed ...
Hot Definitions
  1. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  2. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  3. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  4. Indirect Tax

    A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. An ...
  5. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  6. Beta

    Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. ...
Trading Center