What happens when mutual fund PMs take director or executive spots at portfolio companies? Fundsters who have been following the recent fight between Fairholme [see profile] star Bruce Berkowitz on the one side side and one of his portfolio companies, St. Joe, on the other side may want to take a look at Chuck Jaffe's column on the subject. The MarketWatch columnist worries that such PM involvement breeds conflicts of interest.

"Just think about how a fund manager could invest in a stock that he controls or is on the board of, and could make buy or sell decisions that appear to be best for the corporation but not necessarily in the best interest of the fund shareholders," Jaffe writes. "It's nearly impossible to properly serve two masters."

Jaffe seems less worried about Berkowitz's move in this case than about the possibility that Berkowitz or others might be tempted to try this again elsewhere. 

Edited by: Neil Anderson, Managing Editor


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