Fund managers: you get monkeys whatever fees you pay

When it comes to fund managers, the adage that “if you pay peanuts, you get monkeys” is broken, says Matthew Lynn – you get monkeys whatever you pay.

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The vogue within the investment markets has been to pay for performance. If you pay peanuts, you get monkeys, has become the mainstream view, and asset managers have started to change their fee structure to build in a performance element. It started with the hedge funds a generation ago, with 20% of the profits typically going straight to the manager, and since then it has shifted into more mainstream funds offered to smaller investors. In the UK, close on 100 unit trusts now have some form of performance fee built into them and so do many hundreds more across Europe. They are common among investment trusts as well. Each time, the argument for them is the same. Sure, they will cost some money, but the incentives will also improve performance, and so investors will come out ahead.

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Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.