Fund groups’ failure to ‘show us the money’

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

Pay is a sensitive subject. Discussion around pay always conjures up for me the Channel 4 documentary Show Me Your Money, where staff at Pimlico Plumbers took part in an experiment to tell each other just how much they took home in their pay packet. The twist was that once any perceived unfairnesses were exposed, staff could negotiate a pay rise – but only by encouraging more highly paid staff to give up some of their pay. If I remember rightly a director on £80,000 wrestled with giving an extra £1,000 to a cleaner.

Pay is an even more sensitive subject when it comes to fund managers. Like the companies they invest in, at a certain level of fund management how much managers make becomes characterised as a public interest issue.

Shining a light on the pay structures at asset management groups should not just be playing to headline numbers or gratuitous gossip (although when some of the pay deals leak, there is a fair bit of that too).

It should be about whether the remuneration deals in place are incentivising the right kind of behaviour. What people want to know is how does pay correlate to client outcomes, and whether better pay, for star fund managers for example, equates to higher investment returns.

Well, I wish I could tell you. Money Marketing attempted to extract details on pay from some of the biggest fund groups over several weeks, but after putting out information requests with a total of 28 firms, just seven provided information on pay. No fund group provided information on what proportion of bonuses are based on performance, and how this is weighted for the short or long-term.

Professor Andrew Clare of Cass Business School (of monkeys beat asset managers fame) is encouraged that even seven responded, demonstrating just how sensitive the issue is.

Alongside pay, there is fund objectives. Besides the digging needed to get at this information, there is also more work to do on rewarding fund managers for “performance”. While this is clearly welcome, the reliance on benchmarks means fund managers can still be rewarded despite their sector underperforming on average. So clearly something is amiss.

Transparency is paramount, particularly where a fund is not performing. We already have intense scrutiny of advice charges, and to some extent, investment charges. Next up is fund manager pay.

After all, if firms have not got anything to hide, why not disclose?

Natalie Holt is editor of Money Marketing – follow her on Twitter here