It's official, fund selectors are more prepared to invest in a fund where the manager has a meaningful ownership stake, that's according to Citywire’s latest poll.
Two thirds of the fund selectors who took part in this week’s poll said they would not back a manager who did not invest their own money, in their own fund.
When asked: 'Would you back a manager who didn't invest their own money, in their own fund?' 67% of respondents voted NO, leaving just 33% for the YES vote.
So, for an overwhelming majority of selectors, a manager who had a vested personal interest in the success of their own fund would be a likelier selection candidate than one who did not have any financial ties to their own product.
One selector gave an enlightening glimpse into his thought process on the issue saying: ‘While there are situations where individual PM investment is lost in the tide of the parent contribution, we maintain it as a marker of confidence. Along with all the other perils associated with embedded PM's in large financials, this goes some distance to demonstrably show intent and loyalty to the mother ship.’
However, another selector pointed out that the case is not always straightforward as managers in certain markets are prohibited from investing in their own fund by regulation.
I know that some groups are fully aware of the importance of this issue and require their managers to have a significant amount of their own capital invested in their fund. Others may be restricted, as our second selector points out, due to their domestic market's regulation. This is beyond their control but when I come across a manager who admits he has no personal investment in his fund I do tend to find it slightly odd.
Surely the moment you begin to question a manager's faith in his own investment abilities the less likely you are to select him? And it seems the majority of survey participants also share this view.