There are two very distinct schools of thought when it comes to deciding who should lead an actively managed mutual fund. Some funds opt for the team approach, touting the performance benefits of having a broad team of managers all working together. Other funds choose to market themselves around one or two All-Stars, proven market performers who bring star power and name recognition to the fund. guiding the fund with their strong instincts and vision. In this article, we will examine both styles of management, exploring the pros and cons of each style to help you decide which one best fits your investing needs.

SEE: Active Vs. Passive ETF Investing

The mutual fund team concept is getting a great deal of attention as the SEC requires mutual fund companies to list more people involved with the investment decision-making process on advertising and regulatory filings. Team-managed funds are required to list each portfolio manager of a fund, as well as the team leader. This change gives shareholders and potential shareholders a greater opportunity to evaluate the backgrounds of more of the people that make a major contribution to a mutual fund.

Fund companies normally post biographies of their portfolio managers on the company website, and some of these companies even post biographies of their contributing analysts. Additionally, funds are now required to disclose a manager’s personal stake in the funds that he or she manages, as well as whether he or she manages other portfolios. The new rules are consistent with the current investment climate of full disclosure and have positive implications for investors, since investors can never have enough information.

Some mutual fund companies advertise that only one or two people are primarily responsible for making the investment decisions, especially if the key decision makers have produced excellent results or have very strong investment backgrounds. Years ago, it was common for a mutual fund company to list its chief executive officer as the sole portfolio manager for all of its funds. By any standard, that is quite a bit of work for one individual! To some extent, the All-Star concept is a misnomer and more accurately reflects how a fund is marketed, rather than how it is managed. Virtually every All-Star fund has a horde of research analysts who contribute, making the process more of a collaborative effort despite the advertising literature listing only one person as the portfolio manager.

The Mutual Series Funds of the 1980s and 1990s are a good example of the star manager misnomer. Michael Price, the former owner of the Mutual Series Funds, was sometimes listed as the sole portfolio manager of all of its funds. Price was certainly the most accountable among all of the investment professionals at the firm, but he did not do all of the work himself. The Mutual Series Funds had a very talented investment team that played a major role in the success of this company.

It is unlikely that the Mutual Series funds would have been as successful in the 1980s and 1990s without investment professionals such as Jeffrey Altman, Lawrence Sondike, David Winters and Robert Friedman, among others. Essentially, what these funds show is that there are advantages to gain by putting a face to a fund, even if in truth there are many people working behind the scenes.

Advantages

Regardless of the approach you take, be it team or all-star, it is important to keep in mind that a managed-fund structure is only as good as the people who support the investment process .