Half of mutual fund managers have $0 in their own funds

A friend forwarded me an email last week that I haven’t been able to stop thinking about.

The subject line was three words… “Never trust a skinny chef.”

It’s an old expression. If the chef won’t eat their own cooking, you probably shouldn’t either.

He was applying it to something most investors never even think to check.

The Stat That Stopped Me

Nearly half of U.S. stock mutual fund managers have zero personal dollars invested in the funds they manage.

Zero.

These are the people whose entire careers revolve around picking the right stocks for you. And a huge percentage of them have nothing… not a penny… riding on whether they’re right or wrong.

It’s all publicly disclosed. It’s just buried where almost nobody looks.

He pointed me to one specific fund as an example, DUSLX, a Dimensional Funds US Large Cap Growth fund. Three managers. None of them has a personal dollar in it.

Why This Almost Never Comes Up

Hedge funds, private equity sponsors, real estate operators… they get asked this question constantly. “How much of your own money is in the deal?”

In our community we treat it as a non-negotiable. If the sponsor doesn’t have meaningful skin in the game, we don’t do the deal. It’s that simple.

But mutual fund managers? Almost nobody asks. Mostly because a big-name firm or a trusted advisor’s recommendation provides enough cover for people to skip the question.

It’s the cover that’s doing the work. The trust gets transferred from the manager to the brand, and the question stops being asked.

The Lesson That Extends Beyond Mutual Funds

Before you hand someone your money, find out if they have any of their own in the same thing.

That one question filters out a huge percentage of bad operators, bad funds, and bad advice. It’s the most useful piece of due diligence a non-professional investor can run, and it takes about thirty seconds.

Same goes for the advisor recommending the fund. If your wealth manager is putting you in something they wouldn’t put their own family in… that’s worth knowing.

I’ve made this mistake myself. Early in my career I had a financial advisor who put me in high-fee products that he wasn’t personally invested in. I didn’t ask. I assumed he was eating his own cooking. He wasn’t.

It cost me. And it’s part of the reason I stopped outsourcing and started learning this stuff for real.

The Question to Carry With You

Next time someone pitches you a deal, a fund, a strategy… ask them how much of their own money is in it. Get specific. Get a number.

If they hesitate, you have your answer.

Until next week,

Justin

P.S. I’m curious if anyone reading this has ever asked their advisor that question and gotten an uncomfortable answer. Send me an email and tell me how it went. I’m collecting examples because I want to make sure people in our community are asking before they invest, not after.