Skip to main content

Dagen's Wish List From Fund Managers

A partial refund would be nice. An apology, too. But, please, no more lame excuses.

At the start of every holiday season, maybe you draw up a list of gifts you'd like to receive.

And among the suggestions, there are invariably the dream presents you have no chance of receiving -- a red BMW Z8 with tan leather interior -- and those you might actually get -- a red Toro mower with an automatic bagger.

Well, I came up with my own list for the fund industry. Here's what I'd love to see from fund companies in the coming year. And, as usual, it's a mixture of fantasy and reality.

1. Rebates

If a mutual fund loses a load of your money in one year, it would be nice if the fund cut some of its management fees -- essentially giving investors a rebate on what they paid to own the fund over those 12 months.

Now, some funds do link part of the management fee, which is one component of a fund's expense ratio, to performance.

(FMAGX) - Get Fidelity Magellan Report

Fidelity Magellan is the most notable example. If Magellan beats the

S&P 500

index over the trailing three-year period, then Fidelity gets extra money. But if the fund trails that broad benchmark, then the fund giant gets penalized.



some credit: It's one of the few fund companies that gets paid less by shareholders if returns fall behind.

But there are hundreds of funds in this country that

should be

handing out refunds to investors. (Is it worth mentioning that hedge funds get paid based on performance, and that's something that should trickle down, too?)

Scroll to Continue

TheStreet Recommends

2. Apologies

The returns on some funds have been so abysmal over the last few years that shareholders deserve an apology in the reports they receive twice a year.

And these letters shouldn't be filled with the usual excuses, such as: "It's been a difficult environment for our strategy and for stocks in general." Don't blame terrorism, oil prices, investor confidence, the economy or corrupt CEOs and accountants. Take some blame yourself.

Instead, let's see: "I screwed up. I'm sorry. I promise I'll do better." (There must be an example of some fund manager who has done this, no? Any prospects?)

3. Public Embarrassment

And if that wouldn't shame some managers into producing better performance, then how about some public humiliation?

If a manager cannot craft a decent apology to shareholders, then make that person wear a clown suit at the annual meeting of the Investment Company Institute, the fund industry's trade organization. Red nose and all.

4. A No-Fee Exit

Some no-load fund companies, including


, charge redemption fees if you sell your fund shares within a short period of time.

Now these fees aren't bad. They typically don't go to the fund company, but are put back into the fund to cover things like trading costs. But if performance craters right after you buy a fund, it'd be nice if a firm waived that fee to let you out of the fund free of charge.

Paying for Protection: New Funds Aim to Capitalize on Investor Fear
Principal protection funds may sound good, but you end up paying dearly for this gimmick.

10 Questions: At Charles Bath's New Value Fund, There's No Room for Tech
The manager famed for a 20-year run of upside years sees value in Merck, ConocoPhilips and more.

'Smart Money' Places its Wireless Bets on Nextel, AT&T Wireless
Value skippers like AWE. Meantime, Sprint remains in the dog house.

5. Lose the Load

And speaking of fees, firm after firm is switching from selling no-load funds to letting brokers and advisers hawk their funds with sales charges. But let's see some money-management firms eliminate those loads rather than add them.

It's totally impossible. Just recently, the

Brazos Funds

decided to return to selling funds directly to investors with no sales charges.

Could that turn into a trend? No. But a girl can dream.

6. Work The Phones



, employees throughout the company periodically work the toll-free telephone lines to answer shareholder questions. You never know: When Jack answers the phone, you might be talking to Jack Brennan, the head of the firm.

But other fund-company executives and money managers might learn from this experience. It could push the companies to train their phone representatives a little better.

When I called

ABN Amro

about its


Veredus Aggressive Growth fund recently, the rep who took my call tried to explain the fund's 41% loss this year by saying, "Most stocks haven't done well. ... And it was quite a hot fund until the market slumped."

Thanks, but lame excuses just aren't on my wish list this year.

Do you have any wishes for the mutual-fund business? Send them to me at