The scale of salary excesses in the financial services business has often been compared to that of the premier league in football.
In fact, one chief executive at a fund management firm I used to work for even used to liken his star fund managers to top performers for a football team.
That didn’t stop him castigating one of them for buying Manchester United shares back in 1991, telling the individual concerned that “this isn’t the kind of stock we buy for client portfolios.” The fund manager was forced to sell them and reimburse any costs incurred by the fund. Bad call, since Manchester United shares then went up by a factor of ten over subsequent years! But I digress.
In one sense the footballer/fund manager comparison is very unfair – to footballers. I’m not saying they are not ludicrously overpaid (given the financial circumstances of the clubs they play for). But – and I’m not wishing this on anyone, even as a Chelsea fan ahead of a title-deciding match this weekend – if Wayne Rooney had suffered a particularly bad injury last night, and assuming that the club’s shares were still listed, would you really expect their price to halve?
In fund management, however, things are different. Gartmore’s suspension of Guillaume Rambourg yesterday “in relation to breaches of internal procedures regarding directing trades” (whatever that means) has led to a share price fall of almost exactly that (according to FT Alphaville).
I don’t know anything about Mr. Rambourg, although Citywire reveals that he was fined €300,000 by the Italian regulator in 2006 for front-running. Gartmore says it is still contesting that decision, according to Citywire, so maybe it’s unfair to mention it – though how energetic the firm is likely to be in doing so now it’s suspended the individual concerned must surely be open to question.
But this case surely reveals the absurd, excessive attention still apparently given to individuals at fund management firms who – let’s face it – have no more clue where the market is going than you or I.
I’ve personally witnessed retention payments – and that’s on top of annual bonuses – being handed out to managers whose name is in the limelight, only for the same individuals to be given the boot 12 months later after performance had soured. It’s a schizophrenic world, where the rewards are vastly out of proportion to the actual skill involved. Judging by the Gartmore/Rambourg affair, little has changed since the credit crisis.
If one of the prime selling points of ETFs has always been that you are not paying for this craziness, then that appears to be just as true as it ever was.