Mutual fund managers and the investment industry are constantly promoting the benefits of investing in mutual funds. The benefits they promote include: access to expert managers, diversification, protection against down markets, and the possibility for market beating returns.

If a manager truly believed in his or her own skill, it would stand to reason that they would invest in the funds they manage wouldn’t it? If a fund manager was also an investor in that same fund, it would certainly strengthen their desire to act in the fund investors best interest wouldn’t it?

It turns out that a large number of managers don’t invest in their own funds. According to a recent article published by Morningstar, less than half of the 1066 funds they analyzed in the U.S. had some management ownership. Is this because the vast majority of mutual funds underperform their respective benchmarks, as reported by Standard and Poor’s SPIVA report?

I’m happy to make the following disclosure: I personally invest in the same DFA funds that I recommend to my clients. If I didn’t believe in PWL’s investment philosophy and the DFA funds we use then, in my opinion, I would have no business making the recommendations I do to my clients.