Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
I have been looking at a a fund that has a short but impressive record and noticed that the portfolio managers as well as the fund executives have a previous history of coming from a company as a team, but more disturbing, they all attended the same university. What happens when one or two begin to falter in their performance and it should signal a change of employment, but old friendships get in the way?
Alex: Just what we need another fund ! Do you think maybe you could clue us in on the name of the fund ? I've always been a big fan of incestuous management. Ted
Alex, here's a somewhat dated list from 2001 of the top 150 family owned U.S. businesses - ie: companies in which family members hold a controlling interest. Among those listed are Fidelity, Franklin Resources and American Century. My experience suggests Calimos and James (Rainbow) Funds also fit this category. Likely there are a great many others. http://www.cojoweb.com/ref-companies-Am-largest.html
As you suggest, family ownership poses some special issues. Here's how Wikipedia puts it: "The interests of a family member may not be aligned with the interest of the business ... (If) a family member wants to be president but is not as competent as a non-family member, the personal interest of the family member and the well being of the business may be in conflict ... (Also), the interest of one family member may not be aligned with another family member. For example, a family member who is an owner may want to sell the business to maximize their return, but a family member who is an owner and also a manager may want to keep the company because it represents their career ..." Source of quotation: http://en.wikipedia.org/wiki/Family_owned_businesses
On the other hand, I believe family ownership may dampen the influences sometimes brought by public shareholders to pressure management into "shortcuts" in pursuit of quick profits or higher share prices - possibly to the longer term detriment of the company and clients. So, I think you'll find good and bad companies in both camps. Six of one. Half dozen of the other.
I don't know if this is what the original poster was referring to, but father-and-son teams seem to be fairly common among mutual funds. Yacktman YACKX / YAFFX is a better-known example. Also Appleseed APPLX / APPIX, which I own.
In general I am not a fan of these types of arrangements because of the risk of nepotism. As an investor, I cannot tell whether the managers are being promoted based on their merits or their family interests. All things equal, would prefer a management team without family connections. I had several others before that I sold off and APPLX is my last one, although I am considering changing that one as well.
You made me also think of Bruce Fund, BRUFX, which is probably one of the hardest no load funds to get acess to since this "quiet" father and son team only accept by-mail transactions. Chicago-based Mutual Fund Bruce Fund, Inc., is headed by Robert B. Bruce and co-managed with his son R. Jeffrey Bruce. Here's a couple of reads on BRUFX:
Reply to @bee: I've seen BRUFX mentioned on this board a few times. Interesting fund because of the difficulty of access and the $400+ per share NAV. It hasn't done very well this year -- YTD +6.06% -- but that's a similar story as other conservative small cap funds like ARIVX.
There are pros and cons of family ownership of ANY business.
Nepotism? Sure. The offspring could be a nincompoop. However, let's get real. "Nepotism" is rampant. One does not have to be a "blood relative". People make choices and preferences.
On the other hand, family operated businesses provide assurance of "business continuity".
Frankly, this is one of those things where one can only know AFTER the fact whether it was a curse or a blessing for shareholders.
Jordan, Yacktman are examples the offspring might even be better than the senior. Then on the other hand, in the case of Muhlenkamp it would seem offspring is not good enough to be manager of fund. It really depends.
Comments
Ted
As you suggest, family ownership poses some special issues. Here's how Wikipedia puts it: "The interests of a family member may not be aligned with the interest of the business ... (If) a family member wants to be president but is not as competent as a non-family member, the personal interest of the family member and the well being of the business may be in conflict ... (Also), the interest of one family member may not be aligned with another family member. For example, a family member who is an owner may want to sell the business to maximize their return, but a family member who is an owner and also a manager may want to keep the company because it represents their career ..."
Source of quotation: http://en.wikipedia.org/wiki/Family_owned_businesses
On the other hand, I believe family ownership may dampen the influences sometimes brought by public shareholders to pressure management into "shortcuts" in pursuit of quick profits or higher share prices - possibly to the longer term detriment of the company and clients. So, I think you'll find good and bad companies in both camps. Six of one. Half dozen of the other.
In general I am not a fan of these types of arrangements because of the risk of nepotism. As an investor, I cannot tell whether the managers are being promoted based on their merits or their family interests. All things equal, would prefer a management team without family connections. I had several others before that I sold off and APPLX is my last one, although I am considering changing that one as well.
Hey Claimui,
You made me also think of Bruce Fund, BRUFX, which is probably one of the hardest no load funds to get acess to since this "quiet" father and son team only accept by-mail transactions. Chicago-based Mutual Fund Bruce Fund, Inc., is headed by Robert B. Bruce and co-managed with his son R. Jeffrey Bruce. Here's a couple of reads on BRUFX:
Shut up and Invest:
The best fund you never heard of
Bruce Fund Doesn’t Like Attention:
Bruce Fund Doesn’t Like Attention, Likes To Outperform
Nepotism? Sure. The offspring could be a nincompoop. However, let's get real. "Nepotism" is rampant. One does not have to be a "blood relative". People make choices and preferences.
On the other hand, family operated businesses provide assurance of "business continuity".
Frankly, this is one of those things where one can only know AFTER the fact whether it was a curse or a blessing for shareholders.
Jordan, Yacktman are examples the offspring might even be better than the senior. Then on the other hand, in the case of Muhlenkamp it would seem offspring is not good enough to be manager of fund. It really depends.