Recent Morningstar research once again reveals what should be common knowledge by now – many Wall Street mutual fund managers are interested in growing their wealth, not yours. Karen Dolan, director of analysis at the firm revealed the pathetic truth about the majority of fund managers and their reticence to invest in their own products.
As stated by Dolan, “just under 6% of fund managers invest $1 million or more of their own money in their funds. Also, of the 4,383 funds tracked for manager ownership levels over the past five years, a paltry 51% of fund managers owned no stake at all. Having a stake in a mutual fund means that managers have their interests truly aligned with shareholders. The best managers that we’ve followed and respect a lot tout the fact that they’re investing alongside investors. They find their funds the most attractive place to invest their own money.”
Ms. Dolan has uncovered the stark reality that mutual fund managers, on the average, do not invest in their funds. They are quite happy, however, to sell their products to you, and for a handsome profit to their firm and their retail investment adviser partners. When it comes to mutual funds, the lesson seems to be the same – watch out! ETFs offer a much lower cost and more tax efficient option for long-term retirement investors.