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Three Fund Firms Get More Shareholder-Friendly

FPA, DWS, and John Hancock improve stewardship practices.

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As part of our work on Morningstar's Stewardship Grades for mutual funds, we closely monitor how well funds are serving their shareholders' best interests. If we see a meaningful decline in a fund's stewardship, we speak up, which certainly was the case when we lowered some  Janus funds' grades after some high-level manager departures in 2007. On the flip side, we think it's equally important to point to firms with improving stewardship. Three firms--FPA, DWS, and John Hancock--have all adopted better stewardship best practices that we think are worth a shout-out.

FPA Funds Get New Board Leader
In FPA's case, three of its funds' boards of directors elected an independent chairman in December 2007. The boards overseeing  FPA Capital (FPPTX),  FPA Crescent (FPACX), and  PFA New Income (FPNIX) previously did not have a chairman, but each is now led by Willard Altman, one of the boards' independent trustees.

Altman's election to fund board chairman represents a best stewardship practice, in our view. Morningstar has been very outspoken in its support of the SEC regulation that, if approved, would require that fund boards be led by independent chairmen and be composed of at least 75% independent directors. We think that independent board leadership is a top industry practice because it addresses the inherent conflict of interest between the asset-management company running the fund and the fund's shareholders. For example, fund boards are responsible for negotiating a fund's fees on behalf of shareholders, and we think employees of the fund company may be less likely to push for lower fees because such a move would lower their firm's revenue.

Laura Pavlenko Lutton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.