(New York)

In what comes as an interesting article, Bloomberg has published a piece arguing that instead of the status quo, asset managers should be paying investors for the chance to manage their money. The idea comes from Mercer, a top asset management consultant, and argues that to overcome the problems plaguing active management, investors should agree to pay out a fixed percentage return to investors over a certain timeframe, with the manager keeping any excess that is produced. “We keep getting told by managers that their value creation process tends to be longer than the typical horizon of an investor … This in turn leads to short-termism. Under the new model their investment time horizon can be aligned to their value creation process”.

FINSUM: This would be a total reconceptualization of the way the industry works. The big question is how the investor would get paid if the manager fails to meet the minimum payout. It sounds like third party insurers would have to take part. This is a very interesting proposition.