Do they have your back or just your back pocket? The fun, games, and fees of equity investing Collins St Asset Management July 2023
FY23 recap: ASX 200 defies the bears to end up +10% over last financial year It is often said that: When someone with money meets someone with experience, the person with the experience gets the money and the person with the money gets an experience. For equity investors, regardless of whether or not they choose their own investments or outsource some or all of that responsibility to an external manager/adviser, this remains a very real and important risk to be on top of. Many Directors and Management teams do not run companies for the benefit of shareholders despite all of the claims and promises of future gold and glory laid out in glossy annual reports. Fat salaries for start up company Directors, gifted equity to management in large established businesses and all manner of perks and parties along the way are, all too sadly, par for course. To that end, its important to understand the governance structure of a company and the way in which senior decision makers are remunerated before deciding whether or not to invest. Some key questions we at Collins St Asset Management seek to understand before deploying capital include:
Sadly, a rolling stone gathers no moss in much the same way as an upwardly mobile executive can suffer no financial pain by moving from one company to the next just before the next crisis is uncovered. Of course, Directors and senior Management are not alone in their pursuit of cushy rent-seeking corporate opportunities. Whilst many intermediaries in the funds management space are often no better, there are a variety of fee models on offer which invariably incentivise different behaviours. The table below provides an overview of some of the different ways professional fund managers may seek to charge their clients: Overview of fee structures Author: Rob Hay, Head of Distribution & Investor Relations For wholesale investors only |
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