While many managers do inform the public how much money they have invested, it is not compulsory that they do so.
In a recent Trustnet survey, 87 per cent said it should be compulsory for managers to disclose their holdings, compared with just six per cent of respondents who believed it should be optional.
Source: Trustnet.com
Private investor Govind Parbat believes some managers use investors’ money for their own end, and said he would feel more comfortable if the managers were made personally accountable for their decisions.
"Since their wage is guaranteed, I think many managers use investors’ money to tap into the mega-bonus culture," he said.
Parbat thinks some managers take on an unreasonable amount of risk so that they stand a chance of meeting set return targets. He says performance may improve if a manager had more of a vested interest.
In recent weeks, the risk taken on by Cautious Managed funds has been heavily scrutinised by industry experts. Parbat thinks poor risk management may be a result of managers’ lack of accountability.
Principal at Norwest Consultants Harry Katz thinks it is in the manager’s interest to tell clients how much they invest in their own products.
"Being able to prove that you've put your money where your mouth is does far more than any PR or advertising campaign," he said. "In that sense there is little need to force managers to disclose anything, as those who have invested their own money should willingly reveal this information."
"I would expect managers to contribute a substantial sum to their own investments, in the same way I invest in products that I recommend to clients," he added.
Head of research at Chelsea Financial Services Juliet Schooling says she always asks managers whether or not they have contributed to their fund’s holdings.
"I think having a vested interest in the fund’s performance is very important," she said. "I always feel more comfortable when a manager has contributed their own money."
But Schooling believes it is a step too far to ask managers exactly how much they invest.
"Publishing the exact sum of money would enable investors to gauge the personal wealth of a fund manager, which is inappropriate," she added.
Head of EFA OPM UK Equity Ross Henderson agrees that managers shouldn’t have to divulge their exact contribution.
"I personally invest across the range [of OPM-managed funds], but I would not be willing to tell the public how much. It’s no different from showing a stranger your bank statement," he said.