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FSA’s Turner: Fund managers’ bonuses in need of overhaul

Lord Adair Turner 480
Lord Adair Turner

Outgoing Financial Services Authority chairman Lord Turner has called on the asset management industry to overhaul the bonuses of fund managers to promote more long-term investment.

At the launch of a new report by the G30 consultative group, Turner argued that national authorities should draft new best-practice guidelines to promote long-term horizons in portfolio management. An example of such a guideline, he said, would be making sure any incentives are “reconfigured” to focus on longer-term returns.

“Portfolio managers’ bonuses could be conditional on their performance over a defined period. For senior managers, a minimum of three years,” Turner commented. “This would support the goal of making smart medium-term asset allocation decisions in the context of a long-term investment horizons.”

The suggestion could see fund manager remuneration structured in a similar way to those of bankers, who have been forced by regulators to defer the bulk of their annual bonus. However, Turner said it is unlikely that investment managers’ bonus will fall under the remit of direct regulation.

“I think essentially we are talking about moral suasion,” the Independent reports him as saying. “I think it is quite difficult for us to get into the area of direct regulation of the private fund managers, but I don’t completely exclude that possibility.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Why does he not simply ban the payment of bonuses in the same way he stopped IFAs earning a living by banning commission
    Oh sorry that would mean upsetting his mates at the banks
    Silly me

  2. Definition of class
    “Being able to, but choosing not to.”
    Some hope – greedy little men.

  3. Why doesn’t he go with grace? He has been responsable for the total failure of pension provision in this country, following the inept and ill thought through Turner Report on pensions in 2002 and a multitude of additional poor regulation and leglislation since. He is a go-to expert but fails to appreciate the damage he has done to the long term wealth of the country.
    Having been a conservative at uni, he then became a social democrat when it suited, and cozied up to New Labour to get a number of well paid appointments in various quangos.
    His nose was obviously put out of joint when he was passed over at the BofE and he is now about to lose his job at the FSA. So he is going on an offensive to gain back his flawed reputation. Trouble is he has no coherant strategy for the economy and financial services. Fund managers bonus structure has little bearing on the fund as the fees paid by funds are sort of fixed at outset, paid to the employers who then decide how profitable the fund is. Performance fees charged on the fund are fairly rare still.
    But the guy knows how to attract headlines, no matter how much damage he causes.

  4. If the bonuses at the FSA were performance related for a defined period then they would not have received any from inception of the FSA to date – particularly not for the period Turner & Sants were there. Both total failures and guilty of not enforcing the rules to their Banking buddies, but overseeing the bullying and punishment of the IFA.

  5. RegulatorSaurusRex 12th February 2013 at 1:48 pm

    Dear Mr Turner, we are extinct, have you not been informed of this?

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