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The Capital Advantage

Be Selective

Compare mutual funds with high manager ownership and low fees.

When you compare mutual funds, it’s not surprising that funds from investment managers who “eat their own cooking” — investing more of their own money in the funds they oversee — have tended to outpace the market index more frequently than their peers. It’s also logical that funds with lower expense ratios have tended to outpace the index more frequently. Combining these two traits — high manager ownership and low expense ratios — can help you identify a select group of funds with a track record of outpacing indexes over long periods.1

Characteristics of Core Funds That Added Value Two Screens Can Help Sharpen Your Search

Source: Capital Group, based on Morningstar® data.1

The sheer number of available funds can be overwhelming. We examined the large universe of equity funds in Morningstar’s U.S. and foreign large-cap categories over a 20-year period and looked for funds with two traits: those within the lowest 25% of expenses, and those within the highest 25% in manager ownership. We found that the funds with both characteristics (highest manager ownership and lowest expense ratios) meaningfully improved average outcomes for investors.

Look for Funds That Meet Two Key Criteria Large-Cap Equity Funds With Low Expense Ratios and High Manager Ownership

Web Chart Funds Low Expense

Source: Capital Group, based on Morningstar data.2

As shown in the chart below, not all funds are equal. Most, in fact, rarely outpace the index. However, funds with the lowest expenses have tended to do better than their peers. And funds with high manager ownership have done even better than that. Significantly, the group of funds that share both those characteristics have done better over five- and 10-year periods.

A portfolio of large-cap funds with lower expense ratios and higher manager ownership, on average, outpaced indexes more frequently than other funds. Since large-cap funds account for a big part of most portfolios, those higher success rates can result in substantial gains.

Two Steps Raised the Success Rate Success Rates in Large-Cap Equities (Net of Fees)

Web Chart 10 Year

Source: Capital Group, based on Morningstar data.1

Web Chart 5 Year

1 Source: Capital Group, based on Morningstar data. Based on monthly returns from January 1997 to December 2016. U.S. funds are those in the Morningstar Large Value, Large Blend and Large Growth categories. U.S. index is S&P 500. International funds are those in the Morningstar Foreign Large Value, Foreign Large Blend and Foreign Large Growth categories. International index is MSCI ACWI ex USA. The indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. Unless otherwise indicated, all distributions were reinvested. For more information about the screening process, see Methodology.

2 Data as of December 31, 2016. Domestic funds are those in the Morningstar Large Value, Large Blend and Large Growth categories. International funds are those in the Morningstar Foreign Large Value, Foreign Large Blend and Foreign Large Growth categories. Size of quartiles varies because those funds in the Morningstar database that did not include an expense ratio or firm-level investment ownership were excluded from the analysis. For more information about the screening process, see Methodology.


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.