Active mutual funds can be mysterious black boxes. Here is a method to sneak a peek inside.
Mutual funds are very opaque structures. There is so much we don’t know about them, so much we are refused to access, even when we invest in them.
It is indeed very hard to access the actual composition of their assets (the individual stocks or bonds they own). This information is barely disclosed by managers for various reasons. They might fear to see their ideas and work “stolen”. They might fear being criticized for every decision they make. They might even fear that everyone realize they charging active fund fee level for passive management (which is called “closet indexing”, and is very bad, look out for it).
The main information they often give us about what we really own, is the “benchmark”. This benchmark is supposed to be a good proxy of the fund asset composition and potential risks. But most of the time the benchmark they choose seems a bit off or even misleading. It is always an index, and is therefore very theoretical, but it is not its biggest flaw.
