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Fund Spy

What Fund Manager Bonuses Tell Us

Most investment shops reward managers for short-term results, and few consider risk-adjusted returns.

This article was originally published in the March 2017 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor here.

We believe that shareholders of actively managed funds must maintain long-term investment horizons to reap the rewards of active management. Likewise, investment firms should compensate their managers based on long-term performance. Last year, we published a study that compared the performance time periods used by the top 20 active management shops when determining portfolio manager bonuses. We've expanded that research to include the top 30 active investment firms. We've also noted which shops emphasize risk-adjusted returns as opposed to total returns or cite risk management as a component of manager compensation.