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Special Report

At Odds: Fund Companies and Their Two Masters

Are fund shareholders losing out to fund company stockholders?

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At Morningstar, we frequently hear managers and analysts who used to work on the sell side (at brokerage houses) mention how happy they are to work on the buy side (at asset managers), where conflicts of interest are much smaller. Whereas Wall Street historically wanted analysts to function as investment bankers first, and analysts second, that wasn't the case in money management. There, analysts typically recommended only a handful of the companies that they covered. In short, they were doing research--not sales.

But that's not to say the fund industry doesn't have conflicts. Mutual fund companies embody an inherent tug of war between two sets of shareholders. On the one hand are the holders of the fund company stock. On the other are the mutual fund shareholders.

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