The U.S. Securities and Exchange Commission, in 2006, made it mandatory for fund managers to disclose how much of their own assets are co-invested in the funds they manage. Since then, hedge fund managers have started investing some of their own money into the funds they manage.
But it is slow going. According to the Financial Times, only 8 percent of all fund managers co-invested portions of their annual bonuses in 2010, and an additional 13 percent said they planned to do so in 2011.
In theory, co-investing prevents fund managers from taking undue risks and underscores their conviction in the hedge fund’s investing strategy. Investment houses such as Vanguard in the U.S. and Henderson Global Investors in the U.K. have made co-investing mandatory, while others such as HSBC Global Asset Management have not. According to Morningstar, of its top 30 U.S. funds, Dodge & Cox topped the list with managers having an average of $860,000 invested in their own funds. |
