The thing most likely to get an asset manager fired is not high fees or poor performance, but a breach of data or confidentiality, according to an investor survey by the CFA Institute.
Such security breaches were voted the top reason to leave an investment manager by the 829 institutional investors included in the survey, with underperformance following close behind.
According to the survey, data security is the leading factor determining how much investors trust their managers, ranking above fee disclosure and ethical behavior. While 82 percent of respondents said reliable data security measures were important, 74 percent were satisfied with the measures undertaken by their managers.
More than a quarter believed a major cyberattack or hacking incident could cause the next financial crisis — an event 54 percent saw as likely to happen within the next three years. Eight in ten investors said they were well prepared for the next crisis. Politics was the most-predicted cause for the next recession.
[II Deep Dive: Data Sabatoge Might Be the New Cyberattack]
Other major reasons for firing an asset manager — beyond data breaches and poor performance — included poor communication, an increase in fees, and a negative reputation.
Meanwhile, the two most important considerations when hiring a new manager were the manager’s ability to achieve high returns and trust that the manger would act in the investor’s best interest.
Seventy percent of institutional investors surveyed by the CFA Institute said they trusted the asset management industry. Comparatively, 85 percent trusted the technology industry, while 53 percent trusted the media.
Investors voted real estate firms and “mainstream” asset managers the most trustworthy among investment managers, while hedge funds were trusted the least.
