Investment fund management reports provide investors with crucial information regarding their investments. They are consistent and easy to comprehend. They typically present performance data in a variety of ways (MTD, QTD, and YTD) and are often accompanied by risk analysis data such as VaR and stress testing. Regulatory requirements are forcing managers to provide more detailed information regarding their risk management procedures than ever before.
Investors are keen in knowing how much they are paying for their investment as evidenced in the ever-growing need for complete information about fund fees. Some funds define management fee in a narrow manner and include only costs associated with selecting the right securities for their portfolio in this number. Other funds have “unified fees” that cover a range of costs, including the administration and record-keeping including brokerage commissions, 12b-1 fees.
Many funds use breakpoint agreements, in which the management fee decreases at certain asset intervals based upon the total assets of the fund. To evaluate these contracts, investors should know the management fee for each of those intervals. The GAO suggests that the Commission require funds to provide fee information on a per-share basis at the class level and to report any fees paid out of principal and not from the management fee.
The GAO has also recommended that the Investment Company Act require that independent directors (directors not connected with the management of the fund) are at a minimum a majority of a fund board. This is to ensure that directors who are independent are able to effectively represent the interests of shareholders of funds.