Most Mutual Fund Managers Don't Put Their Money Where Their Fund Is

A report on a study published in the Journal of Financial Economics caught my attention. According to the paper, mutual fund managers who invest in their own fund have better performance than managers that don't. The difference was pretty significant. In 2005, those that owned their fund averaged 8.7% while these that had none of their own money invested averaged 6.2%. That is 40% better.

While interesting, it is not particularly surprising.

What is fascinating and perplexing is how few managers actually invest in their own fund. Only 43% of the managers had any of their personal assets in their own fund. Over half or 57% did not think enough of their own fund to invest in it.

Not only that, but those that did invest did not invest all that much. Mutual fund managers are a pretty well compensated group, yet the average investment of the 43% who put their money in their fund was just $97,000.

Clearly most managers don't think enough of their own cooking to take a bite much less make a meal of it.

Our view on Asset Class Investing is quite different - we have conviction.

We believe in our cooking, or should I say in the academic work over the last 50 years that is the underpinning of Asset Class Investing.

Our stockholders, our senior management, and even our pension plan is invested as we recommend you be in Asset Class Investing. Personally, 100% of my portfolio is invested this way and has been as long as I have been aware of this superior approach.

Why don't more mutual fund managers invest in their own fund?

Hard to tell for sure, but it ought to cause shareholders to pause.

Asset Class Investing is a proven approach to building and preserving wealth, and that is why we have conviction.