Fund managers offered 'skin in the game'

Bank of Ireland Asset Management is one of several fund managers said to be looking at innovative ways of attracting and rewarding star employees.

The fund management business which lost around €15.5bn from its assets under management in last two years and which last week unveiled plans to subsume asset management within its wholesale banking operations, has now introduced a novel method of rewarding employees.

The Financial Times says the bank has revamped its incentive scheme for key staff, establishing a system whereby managers and research analysts are rewarded with "skin in the game" - a system in which insiders use their own money to buy stock in the fund they're running.

"Surprisingly few in the asset management industry offer this," Richard Parkhouse, managing director of PRPi Consulting tells us, although he adds that it's a practice that is increasing, particularly for key investment professionals.

"It tends to be the smaller firms that need to offer those sort of incentives," confirms Chris Manfield, a consultant at search firm the Whitney Group. Difficulties identifying the source of alpha generation mean he says hedge fund managers and career analysts at the likes of Schroders, Newton Investment Management are the most likely recipients.

Separately, New Star Asset Management appears to be cutting back on its payouts. The FT say the company has stopped lavishing generous compensation packages in its attempts to poach top fund managers, saying it is now sufficiently established to attract staff from larger rivals without paying a premium.

New Star's chief executive, Howard Covington, tells the FT share-based pay had been crucial to luring new recruits to a start-up company: "The likelihood of us recruiting a star manager is low. We have simply got them all"