Almost half of all U.S. equity funds in Morningstar Inc.s mutual fund database report no investments by their portfolio managers, according Russel Kinnel, Morningstar director of fund research. A report released today on ownership data for the 6,000 mutual funds in Morningstars database showed 47% of U.S. stock funds and 61% of foreign stock funds reporting no manager ownership.
Mr. Kinnel said it would be premature to draw links between ownership and performance on the strength of Morningstars first extensive look at the data since the SEC started requiring disclosure a few years ago, but future research will explore that link. The report showed an average investment of $354,000 by the portfolio managers of the roughly 170 mutual funds selected by Morningstar analysts as picks, while the corresponding figure for its 70 pans was only $52,000. Citing such investments as an important metric for the alignment of interests among portfolios managers and the investors in their funds, Mr. Kinnel argued that portfolio managers who garner bonuses for top-decile performance are less likely to take outsized risks to achieve that performance if they have a big chunk of their own money in the fund.
The number of managers showing no faith in their process is staggering, Mr. Kinnel wrote.