Investment Fund Management Reports and the GAO’s Recommendations

Investment fund management reports clients with vital information regarding their investments in a consistent, accessible way. They typically present performance information in a variety of ways (MTD QTD, MTD, and YTD) and are usually associated with risk analysis information like VaR and stress testing. Regulations are forcing managers to provide more specific information about their risk management practices than ever before.

Investors are keen in knowing what they are paying for their fund investment and this is evident in the rising demand for more and specific information on fund fees. Some funds define management fees in a narrow way and only include costs associated with selecting the right securities for their portfolio in this number. Other funds have “unified fees” which cover a variety of expenses including administrative and record-keeping services, brokerage commissions and 12b-1 look at more info fee.

Many funds have breakpoint agreements in which the management fee decreases over certain intervals in the asset portfolio based on the total assets of the fund. To analyze these contracts, investors should know the management fee at every interval. The GAO suggests that the Commission demand that funds provide fee information per share at the class level, and to also disclose any fees that are taken out of the principal, and not from the management fee.

The GAO also recommended that Investment Company Act requires that independent directors (directors who aren’t associated with a fund’s management), make up at least a majority of members of the board of a mutual fund. This is intended to ensure that independent directors are able to adequately represent the interests of fund shareholders.

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