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Advisers split on Turner’s call to overhaul fund manager bonuses

Advisers are divided on outgoing FSA chairman Lord Turner’s call for the asset management industry to overhaul fund managers’ bonuses in a bid to promote long-term investment.

At the launch of a new report by the G30 consultative group this week, Turner argued national authorities should draft new best-practice guidelines to promote long-term horizons in portfolio management.

He said: “Portfolio managers’ bonuses could be conditional on their performance over a defined period. For senior managers, a minimum of three years.

“This would support the goal of making smart medium-term asset allocation decisions in the context of long-term investment horizons.”

Hargreaves Lansdown head of research Mark Dampier welcomes Turner’s call.

He says: “Having a three to five year performance bonus makes more sense. Short-term performance incentives offer little benefit to the industry as any fund manager can have their day in the sun.”

But Skerritt Consultants head of investments Andy Merricks says: “You should reward a manager for a return that reflects the targets of a sector or fund. More often than not this is focused on a shorter period.”

Informed Choice managing director Martin Bamford says: “Aside from ditching performance fees, there is not too much wrong with the existing model. Making fund managers focus on the long term can impact short-term returns and visa-versa.”

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