Investment Fund Management Reports and the GAO’s Recommendations

Investment fund management reports help clients with vital information regarding their investments in a consistent and easy-to-read manner. They usually provide performance information in a variety of ways (MTD QTD, MTD, and YTD) and are usually supported by risk analysis data like VaR and stress testing. The regulatory requirements are forcing managers to report on their risk processes in more detail than ever before.

Investors are interested in knowing what fees they pay for their fund investment, and this is reflected in the ever-growing demand for more more detailed fund fee data. Some funds define management fee in a narrow manner and only include costs related to selecting the right securities for their portfolio in this number. Other funds have « unified fees » that cover a variety of expenses, including the administration and record-keeping including brokerage commissions, 12b-1 fees.

Many funds have breakpoint agreements, where the management fee decreases at certain asset intervals in relation to the total assets of the fund. Investors should know how much the management fee is at each interval in order to evaluate these contracts. The GAO suggests that the Commission requires funds to provide fee information per share at the class level, and to report any fees from the principal but 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) are at a minimum of a majority the board members of a mutual fund. This is to ensure that the board members are independent and are able to represent the shareholders’ interests.