Before discussing further why managers are important, let's step back and examine the three ways in which funds can be managed.
First, there's the single-manager approach. In this setup, one person takes primary responsibility for making the fund's investment decisions. The manager doesn't do all the research, trading, and decision making without help from others, though. For example, Harry Lange is still listed as the sole manager of Fidelity Magellan FMAGX, but Fidelity's analysts feed him plenty of stock ideas. The single manager is sole decision maker, not the sole idea generator.
Second, there's the management team, first popularized by families such as American Century, Dodge & Cox, and Putnam. Here, two or more people work together to choose stocks. The level of one team member's involvement or responsibilities can be tough to gauge, though. Sometimes there's a lead manager who is the final arbiter, while other times it is more of a democracy.
Third, and most rare, there is the multiple-manager system. The fund's assets are divided among a number of managers who work independently of each other. American Funds is the biggest fund family using this approach. Multiple managers are more common with funds managed by firms other than the fund company itself, such as Vanguard Windsor II (VWNFX) or Managers Investment Group funds.
Why Managers Matter >>