Is your mutual fund manager investing alongside you? Why not?

mutual-fundsIs your mutual fund manager putting his money where his mouth is?

You may be surprised at how many managers have zero invested in their own funds.

“The results are shocking. Of the 7,700 funds tracked by Morningstar, nearly half are run by managers who don’t have a single penny in their own funds,” Barron’s reports. Not exactly a huge endorsement from managers of their own funds.

Although there are valid reasons to give some managers a pass such as those running concentrated niche funds, zero ownership should give investors pause, Morningstar’s director of mutual fund research Russel Kinnel told Barron’s.

After all, some active fund managers like to invest in companies where insiders hold large ownership stakes, because it can align their interests with shareholders.

“It stands to reason, then, that mutual fund investors would ask the same of their managers,” Barron’s reports.

However, there is a decent chance your fund manager isn’t investing alongside you.

At Covestor’s investment marketplace, portfolio managers “eat their own cooking.” Managers on the Covestor platform have their own money in the portfolios they run, and their trades are replicated in client accounts.

We think this setup helps align the interests of managers and investors, because managers have their own cash on the line.

To learn more about how Covestor works, contact our Client Advisers at clientservices@interactiveadvisors.com or 1.866.825.3005. Or you can try Covestor’s services with a free trial account.

DISCLAIMER: The information in this material is not intended to be personalized financial advice and should not be solely relied on for making financial decisions. All investments involve risk, the amount of which may vary significantly. Past performance is no guarantee of future results.