IDEAL FUND

Align investor and asset manager interests

In order to align the interests of asset managers and investors the industry must be properly incentivised to deliver retirement products of quality. Incentives for retirement savings products should be linked to the risk-return objectives within the investor timeframe (“objective fees”). As opposed to performance fees that target outperforming a certain level of return, “objective fees” should be determined in line with final and intermediate risk-return objectives. If providers are able to construct such fee schemes linked to the achievement of the objectives rather than simply the managing of assets, then we could arrive at a remuneration model that is both in the interests of investors and providers alike. Having said this, to provide the necessary safeguards for relative capital protection as indicated above, there may also be a part individual States (or the EU) need to play to ensure that the financial institutions are supported as needed to build and maintain the appropriate suite of products. As stated previously, it is important that the right incentives exist for industry to design and maintain quality products in the retirement space. With a combination of the state incentive and facilitated low/no-cost distribution models described above, it is believed that for such vehicles a dramatic decrease in ongoing costs should be achievable as absolute asset levels should be significant.