Daniel Godfrey teams up with investment charity to tackle fund manager pay


ShareAction chief executive Catherine Howarth and former Investment Association boss Daniel Godfrey are in talks over how to tackle incentives structures in the asset management industry.

Among other topics the duo will research the underlying design of pay schemes and how remuneration structures work.

This will include compiling evidence on agreements between pension funds and asset managers as well as establishing how the payments are made between firms.

Howarth says: “In addition to the overall fees and charges [story] we need much greater clarity and insight into incentives structures in asset management.

“There is more work still needed around exploring what people are incentivised to do [with their pay] and see if that is good for customers.”

Howarth says the debate around fees should not stop at uncovering them but should also identify what charges are being levied for.

She says: “We are looking into pay incentives and are researching in this area and understanding the fees, but more on what the fees are paying for. Obviously it pays for mostly salaries and a lot of the salaries are made of bonuses so we are looking at how are people incentivised.

“We want to see a truly responsible investment system where investors are focusing on long-term company performance, including how the companies interact with customers.”

Before leaving the Investment Association, Godfrey asked the trade body members to sign the Statement of Principles where they were asked to commit to greater customer transparency, and moves to justify fund manager pay.

Fund managers were to be compelled to explain in simple terms the principles behind their incentive schemes as well as why they believed those schemes were aligned to clients’ best interests.

The Investment Association has pushed back indefinitely the deadline for Statement of Principles signatories after members raised concerns.

Godfrey says: “Incentive structures need to be transparent to investors and show how they are aligned to value delivered to investors. If they can’t get over that hurdle, there’s a problem.”