In a report the IMF said fund managers generate higher earnings and performance fees from asset growth, which incentivises them to remain invested even when a financial bubble is evident.
The IMF’s analysis will strengthen the hand of global regulators who are currently examining which fund managers should be considered systemically important financial institutions (Sifis) or those too big to fail.
In its report the IMF also said that the rapid growth in assets
managed by institutional investors had contributed to instability in
financial markets.“The rise of the institutional investment management industry has coincided with three of history’s largest [asset price] bubbles in the last 25 years,” wrote Brad Jones, an economist, in the IMF’s working paper.
The paper, entitled Asset Bubbles: Re-thinking Policy for the Age of Asset Management,
called for radical reforms to asset managers’ pay contracts, including
multiyear clawback provisions such as those now in effect in the banking
industry.
Speaking at a conference in Boston this month, Sir
Paul Tucker, the former deputy governor of the Bank of England, told an
audience of fund managers that they were “bulls***ting the American
people” by playing down the risks to financial market stability caused by employing leverage within products.
Last week, the Bank for International Settlements also weighed into the debate regarding Sifis.
The Basel-based BIS, known as the central bankers’ bank, said that
the decisions made by only a few big fund managers could determine how
well bond markets function in a future crisis. Fonte: aqui
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