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Mutual Fund Manager Potential Assessment Part 2

Inquiry about Mutual Fund Manager's Portfolio

A fund manager that owns a significant number of shares of the mutual fund s/he governs signifies the confidence in his/her own possibilities. You can check the actual ownership of the fund manager since the SEC has made obligatory for fund managers to announce the exact possession shares of the mutual fund they govern.

On the other hand, the disclosure of the exact ownership of shares of the mutual fund may not be representative of the exact portfolio of the fund manager, since the state possessions required by SEC are within dollar ranges. For example, if the fund manager states that he has $1 million worth of investment in the fund s/he governs, we are not familiar with the exact amount of the holdings of the manager and the value of his/her participation in other funds. On the other hand, an investor that has just started in the mutual fund field and has not yet accumulated significant resources will have a higher percentage of investment in the mutual fund since s/he has not enough money to invest in other places.

Third-Party Verification

In order to get unbiased information about the status of a particular mutual fund manager you can go to the following sources:

  • The mutual fund website
  • The mutual fund prospectus
  • Morningstar and Yahoo Finance for a comparison of performances, r-squared and alpha.
  • The SEC and NASD

Mutual Fund Manager's Unimportance

Generally, the importance of the mutual fund manager is determined by the nature of the fund itself. Cases that eliminate the knowledgeable judgment of a mutual fund manager include:

  • Index funds - since they imitate the behavior of a particular index, they don't rely on the expertise of the fund manager. In this way eliminate the need for an extremely knowledgeable manager.
  • Mechanically-driven mutual fund managers - since computer timing systems are used the fund managers' role is not of significant importance. In such cases the mechanically-driven managers are deprived of the opportunity to put into action their own judgment.
  • Modest return ranges mutual funds (e.g. short-term bond funds)

Generally, the role of the mutual fund manager is determined by the type of mutual fund. It is up to you to decide whether you are going to purchase index fund or a managed mutual fund and thus select the importance of the fund manager. Always keep in mind the characteristics of a skilful fund manager that we have provided. We have done our job by presenting you the qualities you should look for in a fund manager and now it is your turn to do yours by choosing the most suitable fund manager for your resources. 

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