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Fund Spy

The Benefits of Strong Shareholder Communication

Some managers go the extra mile to inform you about your investments.

One of the things that we Morningstar fund analysts highlight in our Stewardship Grades is shareholder communication. If given a choice between great returns with lackluster information and lackluster returns but great information, most investors would probably choose the former. The trouble: You can't pick returns in advance.

You can, however, choose to invest with managers who in one way or another do a good job of explaining how they invest your money. When their funds are doing well, it's a plus. When their funds are lagging peers, it can be of huge comfort. Plus, some managers go farther afield, telling you how they personally are investing or what macroeconomic trends they're watching that are important to individual investors. The better a manager explains his strategy, the better job you can do using the fund. Ultimately, being a well-informed investor is your personal responsibility, but some fund firms make that job a lot easier for you to do. By now, regular readers of know we dig the shareholder letters produced by Marty Whitman of Third Avenue, Bill Gross and Paul McCulley of PIMCO, and Chris Davis and Ken Feinberg of Davis Funds. So, here I thought I'd share a few highlights from other shareholder reports.

Individual Stock Information
For stock-picking junkies, almost nothing beats having a fund manager lay out his or her thesis on specific stocks. It gets you deep into the mind of the manager and thus truly helps you understand how the fund is supposed to work.