In evaluating the new disclosures required of mutual funds, it’s wise to ask these questions:
Portfolio holdings. Is the portfolio manager adhering to the stated objective?
Risk measures. Are they from an independent source? Do they allow you to compare the risk in funds from other families?
Value of fund shares held by portfolio managers, trustees, and fund company executives. Who has “skin in the game”?
Portfolio manager compensation structure. Are the managers’ interests aligned with those of shareholders over a timeframe appropriate to your client?
Impact of fees and expenses per $1,000 invested. How do the fees and expenses compare to other funds in the peer group? Are higher fees and expenses justified by superior performance?
Impact of brokerage commissions. What effect do brokerage commissions have on the expense ratio? Are they reasonable in the context of portfolio turnover? Is the fund getting best execution without conflicts of interest?
Breakpoint discounts. Is the investment under consideration close to a breakpoint? Can the client qualify for a discount by investing a bit more?
Proxy voting. Is the fund taking care to identify and support shareholder-friendly proposals?