Fund style drift has become a big enough problem that retail advisors have started fact-checking every prospectus in order make sure that everyone's fiduciary responsibilities are being met.
Before 2008, some of them tell Financial Advisor, they took the prospectus on faith.
After all, every fund company is at least as heavily regulated as any RIA out there, so you would think someone at the SEC was going through all the paperwork and checking it against actual portfolio holdings.
Apparently not. Managers have been investing outside their formal mandates for years now -- whether to chase performance or simply out of inertia isn't clear -- and nobody's blown the whistle yet.
If anything, last year's Supreme Court ruling in favor of Janus gave a green light to "misleading" prospectus statements on the technicality that the nominal fund manager and the people actually investing the assets were legally different entities.
But in that scenario, who is liable if the prospectus doesn't match the portfolio?
The fund's advisor picks the stocks, theoretically according to the investment policy statement.
The fund's manager writes the statement.
And the managers do not seem too interested in holding their advisors to their fiduciary duties, so the buck passes to the people who recommend the funds to retail clients -- to the street-level advisor.