Vote profiles

What do the fund profiles tell me?

We provide profiles to help you understand how mutual funds and and mutual fund families use their proxy voting power. (Here are examples for a fund and fund family.)

Because different investors have different ideas about what the right mutual fund voting policy is, we don't try to rate the quality of mutual funds' voting records. Instead we provide a number of ways to compare the "activism" of different funds, measured by how often they vote against what corporate management wants.

Some investors will want a fund with a high overall activism score, indicating that it is relatively activist in all issue areas (director elections, executive compensation, corporate governance, and corporate impact). Other investors may want a high degree of activism in one area but be more comfortable with a moderate approach in another.

What does "activism" mean (as in "activism scores")?

In general, "activism" means action designed to bring about change.

In investing, "activist shareholders" are investors who try to increase the value of their holdings by influencing corporate management in some way. The activist label is often applied to hedge funds that buy a stake in a company and try to alter the management team or change the dividend policies in order to increase shareholder value.

We use the "activist" label to describe funds that use their voting power to seek changes at the companies they own. We measure this by calculating how often the fund's vote went against the voting recommendation issued by corporate management. (Typically, management supports its director nominees and opposes all shareholder proposals.)

For more on activism, see Andy's blog entry "What we mean by activism".

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What do activism scores measure?

Activism scores measure how often a fund or fund family votes against the recommendation of management.

The simplest way to do this would be to calculate the percentage of all votes cast by a fund that went against the recommendations of management. But since over two-thirds of proposals are director nominations, this score would mostly reflect how different funds approached director nominations.

Instead, we defined four issue areas that we believed were of roughly equal importance to proxy voting specialists:

  • Director nominations: who represents shareholders
  • Executive compensation: how and how much executives are paid
  • Corporate governance: the internal rules that structure decision-making
  • Corporate impact: relationships between the firm and its employees, customers, the world.

We calculate an activism score for each of these areas, and the overall activism score is the average of these four. So the overall activism score can be thought of as the proportion of votes a fund casts against management's recommendation, weighted to reflect our sense that the four issue areas above are of equal importance.

Another way of putting it: the overall activism score is the expected number of times that a fund would vote against management on a sample of 100 proposals, where 25 proposals were drawn from each of the above issue areas.

We count abstentions as being against management on management proposals but not on shareholder proposals.

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Of course, our measure misses some important aspects of shareholder activism. It doesn't consider the dialogue between shareholders and management that many shareholder activists say is the most important part of what they do, and it doesn't perfectly account for differences in holdings among institutions. We think our activism score do provide a good indicator of where a fund votes on key issues, particularly in comparison to other funds.

For more on our activism scores, see Andy's blog post "Developing an activism rating".

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What do the figures mean?

We provide two kinds of figures to help you compare one fund's voting record to other funds.

Activism footprints

Our activism footprints provide one way of quickly getting a sense of a fund or fund family's voting style compared to other funds.

Compare two activism footprints:

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CalPERS

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Fidelity Magellan

CalPERS is a more activist voter than Fidelity Magellan, and the larger size of CalPERS's activism footprint indicates that. But the shapes tell us much more about their voting styles.

If a fund were equally activist in the four issue areas, the footprint would be a perfectly symmetrical diamond. These footprints are not. The top corner of the CalPERS diamond is a little closer to the center than the other corners are. This indicates that it is less activist (relative to other voters in our database) on director elections [D] than it is on executive compensation [EC], corporate governance [CG], or corporate impact [CI]. Fidelity Magellan is most activist on corporate impact [CI] and least activist on corporate governance.

We think this is a helpful way of quickly summarizing a voting style, but most people aren't used to looking at figures like this (sometimes called radar plots, spider plots, or web plots). Please share your thoughts with us. Do you find it useful? How can we explain it better? (Back to top)

Activism plots

Our voting profiles include lots of little plots like this: Activism_plot_10_77

These plots are designed to give a quick sense of how a fund's voting record compares to that of other funds in our database.

The numbers under the plot indicate the highest and lowest activism scores in our database: 10 (indicating a fund that very rarely votes against management) and 77 (indicating a fund that votes against management over 3/4 of the time). The red line indicates this fund's score; it's about a third of the way between 10 and 77 so we might guess that it's a little over 30. More important is where the red line sits compared to the blue area behind it. The blue line indicates how many funds have a particular activism score; the spikes between 10 and 30 indicate that many funds have an activism score in that range.

Based on the activism plot above, we can tell that this fund is significantly less activist than the most activist funds in our database, but more activist than the majority.

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