Alignment of interest


When I evaluate managers of potential investments one of the most important factors is alignment of interest. People will always act in their own best interest, so I want to make sure that managers are paid based on performance and that they share the downside. It is important that both apply. A manager that gets large bonuses if everything goes well, but does not suffer the consequences if it goes bad will take too much risk. On the other hand, a CEO that is not rewarded for good results but penalised for bad, will not try to deliver anything above the minimum required to stay employed. 

When starting Pandium we did not want to hold ourselves to a lower standard than we hold others. We therefore decided to adopt a, for the fund industry, very uncommon incentive structure that puts us in the same boat as our investors. Here is a summary:

Paid based on performance

  • We only charge a fee when we have generated returns that are above those of the global equity index MSCI World. As active managers our purpose is to beat the index and we should only be paid when we do.

Sharing the downside

  • We at Pandium (employees, owners and board members) are together the largest investor in the Fund, representing 47% of assets. Every single employee, owner and board member has invested in the Fund. 
  • I have (happily) agreed that I will not have any other investments than Pandium Global. All my money is and will be invested in Pandium.

Besides being fair towards our investors I actually think that this structure will make us better. We will always have to earn our fees and we will not take unreasonable risk doing so.