Fund Managers Who Eat Their Own Cooking

Plenty of stock investors pay close attention to trades by company insiders. Investors figure that corporate executives know their businesses better than anyone else. So if a chief executive dumps all his shares, outside investors may lose confidence in the stock.

The same thinking should apply to mutual funds. When a portfolio manager refuses to invest in his own fund, investors should be wary.

In the past, few investors paid attention to manager investments, but that could change soon. Morningstar(MORN Quote) has been tracking manager investments for 18 months, and it has begun publishing some of the new data. While it's too soon to draw precise conclusions, preliminary evidence suggests that investors should pay attention to what managers do, says Russel Kinnel, Morningstar's director of mutual fund research. "It's likely that there is a relationship between manager ownership and how funds perform," Kinnel says. ...