Traditional measures of mutual fund skills focus on portfolio activeness or performance but offer little insight into how managers select stocks. To decipher this managerial skill, we employ Large Language Models (LLMs) to measure the semantic distance between mutual fund prospectuses and the strategic priorities outlined in firms’ 10-K filings, which captures difficult-to-understand information that requires managerial expertise to process. Funds with high traditional skill measures outperform unskilled peers only when they invest heavily in distant stocks. Moreover, distant investments made by skilled funds predict future stock returns. Our findings reveal a novel mechanism behind managerial skills.