Fund of Funds Shareholders Cannot Sue on Advisory Fees of Underlying Funds

Until recently, no appellate court had addressed whether shareholders of fund of funds mutual funds may pursue claims under Section 36(b) of the Investment Company Act of 1940 (ICA) concerning the fees charged by underlying funds in which the fund of funds invests. The Eighth Circuit’s recent opinion in American Chemicals & Equipment 401(k) Retirement Plan v. Principal Management Corporation addressed that issue squarely, holding that fund of funds shareholders lack standing to pursue claims for excessive fees charged by the underlying funds.