Motivating Money Managers
Many experienced investors recognize that fees, bonuses and other reward schemes aren’t enough to motivate mutual fund and hedge fund managers to look after their clients’ interests. As we know it’s easy enough for a manager to take big risks so they can get bonuses for a few years of high returns. When it goes wrong they only lose a bit of income while clients can lose their savings. If the manager actually invests a lot of their own assets they have a much bigger downside from taking risks.
Not surprisingly, few managers attempt to do this, talk about it, or even reveal how much they have invested in their funds. So it’s nice to see Steadyhand openly reporting that 80% of their personal assets are in their funds. This sets them apart from the rest of the industry in an impressive way. If I ever wanted to use an active manager I would look closely at them.