Prince Charles royal ruckus for fund managers saying that short-term thinking was making their brand of capitalism increasingly “unfit for purpose”
October 22, 2013 Leave a comment
Last updated: October 18, 2013 2:03 pm
A right royal ruckus for fund managers
By Neil Collins
Prince Charles’ criticism likely to be shrugged off
The Prince of Wales may know as much about finance as the average fund manager knows about the royal family but sometimes he’s uncomfortably close to the truth. This week he told the National Association of Pension Funds that short-term thinking was making their brand of capitalism increasingly “unfit for purpose”. This irritating, overworked phrase aside, there’s a serious problem here, although short-termism is a symptom rather than the cause. The malaise in this industry can be easily summarised: too many coins are sticking to the shovels of the managers and the brokers. Since they designed the model, this is hardly surprising: they get paid whatever happens to the fund being managed. There is the nuclear threat of losing the mandate but generally only prolonged poor performance allied with no convincing case for improvement causes the bomb to be dropped. Running a fund is so lucrative that there are four pages of them in your weekday FT and little more than a single page of the underlying stocks that the funds trade. Describing this problem is easy; breaking the model is much harder. The Kay report recommended scrapping quarterly reports and greater engagement by fund managers with companies. It singled out Neil Woodford as the model manager. Unfortunately, Mr Woodford has now left the big fund he ran and the response of the average manager to the royal criticism is likely to be: why should I bother?
About bambooinnovator
Bamboo Innovator 