3 of the Best Fund Companies

#Morningstar  #Vanguard #MutualFunds

If you’re investing for the long term, be sure to think about the fund company behind the fund. Over time, the fund company will have a big impact on your fund. They can raise or lower fees, change managers, promote analysts, and decide when to close a fund, among other things. A great fund company parent increases your odds of success. We don’t give out many High Parent ratings, but here are three.

Vanguard in many ways sets the standard for stewardship. They are owned by fundholders and thus free of the conflicts of serving corporate owners versus fund owners. That translates to very low costs and straightforward language that describes a fund rather than spinning a marketing pitch. Vanguard generally operates index funds itself, but then it farms out active management to other firms. Those active funds have generally been winners, too. The one negative here is that Vanguard has had customer service problems in part because people often invest with them directly whereas most other funds are sold through some form of intermediary that provides most of the services investors need.

T. Rowe Price TROW is a different breed as it almost exclusively runs actively managed funds, and its stock is publicly traded. T. Rowe stands out for its abilities to hire and train excellent analysts and managers in a wide range of strategies. They are good at value investing, they are good at growth investing, domestic and international equities, and even muni funds. Some of their taxable-bond funds are mediocre, but T. Rowe is still investing at a very high level.

Dodge & Cox is a smaller firm that isn’t trying to do everything. They simply have one value strategy that they apply to U.S. stocks and foreign stocks, plus a corporate-bond-driven fixed-income strategy that’s also available in foreign and domestic strategies. Dodge & Cox is owned exclusively by employees, and they have to sell when they retire or go to another firm. That makes the firm very stable, and their stock is a strong tool for retention.

One thing that unites all three firms is they serve shareholders very well with responsible strategies and low fees.

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Russel Kinnel on Twitter: @RussKinnel

[bob]

I'm surprised Fidelity Investments is not one of your three. They have a great website, provide prompt service on the phone (unlike Vanguard), and have funds that meet or beat Vanguards selections.