Although there have been reports suggesting that funds where the portfolio manager has some of their own money invested might have both an incentive and proof to outperform their peers, a new study underscores that even more compellingly, The Wall Street Journal reports.

The study, conducted by researchers at the Georgia Institute of Technology  and the London Business School, looked at 1,300 mutual funds. They separated the funds where the manager owned at least some shares in 2004, and found that they delivered 8.7% in 2005, compared to 6.2% by the funds where managers held no shares.

Nonetheless, fewer than 50% of fund managers have their own money tied up in the portfolios they run.

And fund companies are increasingly encouraging the practice. At Franklin Templeton and Janus, for instance, rather than reward portfolio managers in cash or stock, the companies are directing the pay to share of the funds they run. Legg Mason is now requiring senior managers at its Royce & Associates division to invest at least $1 million in the funds they run, while assistant managers must lay down $500,000. Putnam Investments is making it known whether its fund managers invest in what they run in fund prospectuses and on its website.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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