Should You Buy Stock Funds or Fund Company Stock?

Morningstar.com - Should You Buy Stock Funds or Fund Company Stock?: "'I decided there was only one place to make money in the mutual fund business—as there is only one place for a temperate man to be in a saloon, behind the bar and not in front of it . . . so I invested in a management company.'
Nobel Prize-winning economist Paul Samuelson uttered those words at a 1967 Senate hearing on financial legislation, but it doesn't take a genius to see the truth in it. We compared the returns of the shares of publicly traded mutual fund companies with the average returns of their mutual funds and found Samuelson's quip to be as incisive today as it was nearly 40 years ago. In most cases investors would have done better with the firm's stock than with its average stock fund."
The difference between fundholder and shareholder returns was often stark. U.S. Global Investors' GROW shares rose 24% on an annualized basis over the 10-year period ending in December, or five times the gain of the small shop's average equity fund. Over the same time period Eaton Vance EV shares rose more than 33% on an annualized basis, which was quadruple the average return of the typical Eaton Vance stock fund. Meanwhile, the shares of Alliance Capital Management AC increased by an annualized 25%, or more than three times the return of the average AllianceBernstein equity fund.