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Managers Intentionally Left at the Helm of Poorly Performing Funds

Some funds with the worst performance over the last five years also have managers who have overseen the fund the entire time as it has deteriorated, and their employers don’t have any immediate plans to make a change.

While fund companies claim they are on top of things and handle situations as they arise, advocates and people in the industry say that there are a large number of reasons why a company would knowingly allow a fund manager to continue in spite of poor performance.

"There’s a lot of indifference as long as there aren’t outflows," said Gary Gensler, a former under secretary of the U.S. Treasury and author of the book The Great Mutual Fund Trap (see MFMN 10/14/02).

‘Cash Cows’

Calling the fee stream from mutual funds "cash cows," Doug Fabian, of Successful Investing, an investment advisory service, said fund complexes don