April 4, 2016

Should fund managers invest in their own funds?

There is a strange term called dogfooding which conveys an  impeccable logic. This is it: If you are employed at a dog food company, you should be feeding your dog the same food. Why? Because if the product is as good as your marketing and sales team says it is, you would buy it yourself.

It is tantamount to a sign on the restaurant that says “The owner eats here too”. In the fund industry, it would correspond to whether fund managers have “skin in the game” or “eat their own cooking”, which translates into whether or not they invest in the funds they manage.

Do fund managers in India invest in their own funds?

A lot of them do. A fund manager confessed that in his earlier company, it was mandated that part of his bonus would have to be compulsorily utilized to invest in the AMC’s schemes – a fixed percentage would go into the schemes he was managing and the balance left him with the option to pick up any other fund of the AMC.

Read more at http://www.morningstar.in/posts/36162/should-fund-managers-invest-in-their-own-funds.aspx

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