Canadian Investment Review

Are asset managers’ interests better aligned with investors?

Written by Staff on Thursday, September 15th, 2016 at 7:09 am

balance coin stackAlternative asset managers are exploring a broader set of performance fee and management arrangements designed to improve the alignment of their interests with investors, according to a new survey by the Alternative Investment Management Association.

The study of 120 alternative investment fund management firms looked at the design of manager remuneration, investment terms and other methods that deepened the relationship between alternative asset managers and investors.

The report confirmed emerging trends such as claw backs, in which a share of past performance fees are returned to investors during loss-making periods and skin in the game, in which managers invest their own personal capital alongside their clients’ investments. These practices can strengthen the manager/client relationship and can result in investors agreeing to lock up their capital for a longer period of time, according to the study.

“Hedge funds and other categories of alternative investment funds have, for decades, offered close alignment of interest with their investors,” said Jack Inglis, chief executive officer of the Alternative Investment Management Association.

“…What our survey shows is that managers now have a much larger array of tools at their disposal and are able to create ever closer and more tailored alignment. This trend helps to explain why, with only isolated exceptions, pensions and other investors have remained loyal to hedge funds in recent years.”

The report also found that:

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