Investment Managers performance bonus

Aegis

At the end of the day the final returns are all that matter. I personally choose to avoid funds with performance charges because I feel that the annual management charge already incentivises the investment team sufficiently, and I don't want to see my gains slashed. On the other hand, I haven't yet seen a fund that I'd want to invest in where such a charge is levied. If one comes along with an astonishingly good strategy and starts blowing away the competition, I'd consider it if the returns were still higher after all charges.

At the end of the day, it's their company and they will reward themselves as they wish. It's all set out before you invest, so if you don't like it you don't have to buy it. It's very unlikely that you will make any changes by buying into these funds and then complaining (if anything you make the model more sustainable by buying in instead of going to a cheaper competitor)

purch

It was you who raised the question of a product

So this bit "I have a holding in a large investemnt (sic) trust where the managers get a performance related fee" must be a figment of my imagination then.

If the fact that you willingly invested in a Trust with this performance fee, is unrelated to your opinion about these fees, then why mention it ?

BTW do you actually think the Government and their clueless poodles at the FSA really have the intention and ability to limit bonus's in the Banking Industry, or is it just the usual hot air and empty rhetoric that has been the main feature of the last 12 years ???

Geriatric

purch wrote: »

So this bit "I have a holding in a large investemnt (sic) trust where the managers get a performance related fee" must be a figment of my imagination then.

If the fact that you willingly invested in a Trust with this performance fee, is unrelated to your opinion about these fees, then why mention it ?

BTW do you actually think the Government and their clueless poodles at the FSA really have the intention and ability to limit bonus's in the Banking Industry, or is it just the usual hot air and empty rhetoric that has been the main feature of the last 12 years ???

Sorry I do not understand the points that you are trying to make.
Perhaps I did not set out the position clearly enough.
I have an investment (shares) in a large publicly quoted investment trust where the directors appoint and agree the remuneration of the investment mangers. I am not aware of any occasion where any company, operating under the umbrella of these large management companies have replaced the investment managers. I may be old fashioned but I do not consider an investment in shares to be the purchase of a product.
The mangers receive a bonus when they beat the laid down yardsticks but do not suffer when they feel to meet the yardsticks. In other companies the managers have a deduction when they fail to meet the yardstick.
Neither system is "stupid". One system is unfair the other fair.
My original posting posed two questions.
If they under perform they do not suffer any deduction. This one sided arrangement seems to cut across present bonus thinking. Should this be a matter for the FSA to consider?
Some investment trust managers have a rolling system where the bonuses are carried forward and negative years are charged. Should this not be the system for all such arrangements?
As I have not received any specific replies to these points I now consider the matter closed.
I would add that using words such as "stupid, clueless poodles etc." does no favours to the quality of your postings.
I thank you for your input.

FATHEROFTWO_2

Geriatric.

I think we have been talking about different forms of investment here.

You I believe are talking about a single share of a company that perhaps are part or run a group of companies and I think most of us have been talking about oeics effectively unit trusts which in some cases track an index/sector or asset allocation consisting of a group of companies not connected within a collective investment fund.

Is this correct ?

purch

Back to the OP

Should this be a matter for the FSA to consider?

No it should not.

Individual company's and the owners of these company's should be the only people who determine the level of renumeration that their employees receive.

In the cases of the Banks where HM Government is the majority shareholder, it is within their power to exert some control over renumeration.

In the cases of Banks that HM Government does not have any ownership then it is not.

In the cases of Investment Trusts, then it is up to the shareholders and the board that they appoint to control and decide on renumeration matters.

None of this should be within the remit of the FSA to decide.

An Investment Trust is no different to any other publically quoted company. If you are a shareholder in Tesco and do not agree with the renumeration policy, you can either try to get it changed through the normal channels, or you can sell your shares.

Why should an Investment Trust PLC be any different ?

atypical

purch wrote: »

None of this should be within the remit of the FSA to decide.

The remit of the FSA should be to ensure financial stability regardless of what that entails. If there's anything we should have learnt from this recent debacle it's that markets don't know best.

To go back to topic, isn't one of the arguments against bonuses with bankers that it promotes short term gains at the expense of longer term ones? Is there a reason this argument can't be applied to performance fees?

It matters little anyway as, as many have said, you can vote with your feet.