The WSJ Looks for Some Skin
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Tuesday, January 18, 2011

The WSJ Looks for Some Skin

A recent study from Morningstar suggests that a fund manager invested in his or her own fund is a better steward for shareholders, the Wall Street Journal reports.

In 2010, the average core stock fund with no manager investment earned a rating of 2.93 stars, according to Morningstar. The average star rating rose with the amount of money the PMs invested; funds in which the manager had at least $1 million invested earned an average of 3.51 stars.

"Whatever drives it, when a manager is also a shareholder, they tend to be a better steward for your money," David Kathman, senior fund analyst at Morningstar and one of the authors of the study, told the Journal.

Kathman also said that knowing that the manager has skin in the game isn't the only reason to choose a fund, but it can be a tiebreaker for selecting between two funds.

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