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Canadian investors still don't really know how much the fund managers they bet on are betting on themselves.

More than a decade after U.S. regulators mandated the disclosure of U.S. managers' holdings in their own funds, no comparable requirement exists in Canada. It's not even being considered.

Most Canadian fund companies offer up some general, limited information on their managers' personal stakes in the funds they run, which is also known as co-investment. So Canadian investors can ascertain who is leading and who is lagging the industry on managerial investment, at least at the firm level.

But the reporting is voluntary, unverifiable and incomplete.

"I think the public is owed this information," said Christopher Davis, director of research at Morningstar Canada. "It's hard to have faith in a manager who doesn't seem to have faith in him or herself."

Advocates for disclosure of co-investment argue that it represents a signal of confidence in one's own product. And there is research to suggest that funds with greater management stakes tend to perform better.

"A portfolio manager's ownership in a fund provides a direct indication of his or her alignment with the interests of shareholders in that fund," the U.S. Securities and Exchange Commission said back in 2004.

The following year, the SEC began requiring all fund managers to report co-investment annually.

The earliest data that emerged from that disclosure revealed that relatively few managers were heavily invested in their own funds, according to Morningstar, which has been a leading voice on the issue in the United States and Canada. And nearly half of all U.S. equity funds had zero management ownership.

"The number of managers showing no faith in their process is staggering," Morningstar's director of research, Russel Kinnel, said in a 2008 report. "I can't think of why anyone should invest in a fund that its own manager doesn't invest in."

He cited two possible exceptions: managers who run niche funds or those who run several different funds. For them, lower levels of co-investment might make sense.

It's not possible to say how Canadian co-investment compares to U.S. levels. That amount of detail is not required by Canadian regulators nor is it volunteered by fund providers.

However, Morningstar solicits co-investment information from Canadian fund firms by way of a voluntary annual survey, which at least makes it possible to measure up one fund provider against another.

This year's survey shows that the Canadian firms with the strongest co-investment policies include AGF Management Ltd. and Steadyhand Investment Funds. AGF requires manager investment of at least two years' base salary, while Steadyhand's employees had almost 90 per cent of their liquid net worth invested in the firm's funds as of June, 2015.

Royal Bank of Canada is another leader with 60 per cent of its managers having at least two years' base salary invested in either RBC or PH&N funds.

Toronto-Dominion's fund managers also have long-standing co-investment requirements, though at a lower standard of one year of base salary, Mr. Davis said. And Canso Investment Counsel, as well as QV Investors, both meet the industry standard by allowing employees to invest only in company funds.

At the other end of the scale on co-investment are National Bank of Canada's funds – 75 per cent of their managers had less than one year's worth of salary invested. Those numbers, however, apply mostly to funds subadvised by Fiera Capital, which purchased National Bank's money management arm in 2012.

National Bank has no internal fund managers. And when screening subadvisers, co-investment is one criteria among many, said Terry Dimock, head portfolio manager at National Bank Investments.

"It is important, but you have to take a holistic view," he said, describing a process emphasizing manager compensation and risk management. "I wouldn't want to put too much emphasis on one number."

Mackenzie Financial also reported relatively low co-investment levels to Morningstar, with 45 per cent of its managers having one year's salary or less in their own funds.

Mackenzie said at the time of the survey the firm had recently added several new lead portfolio managers who had not yet had the opportunity to invest heavily in the funds they ran.

Meanwhile, Canadian Imperial Bank of Commerce is one of the few Canadian fund firms that has declined to disclose any numbers on managerial ownership, Morningstar said.

CIBC said it is reviewing that policy. And an official portfolio manager incentive plan requiring co-investment has recently been put in place, a spokesperson for the bank said.

The information gathered by Morningstar may help Canadian investors choose to invest in one fund over another, said David O'Leary, managing partner at Eden Valley Partners in Toronto.

"What better way to align the interests of the fund manager and the investor, than to have the fund manager actually be an investor?" Mr. O'Leary said.

All fund managers naturally want to perform well – their professional reputations, not to mention compensation, depend on it.

But in some ways, the interests of the manager and the fund-holder diverge, particularly when it comes to fees. Fees benefit the fund company and manager at the expense of the investor.

"If you're an investor in the fund itself, you become a voice for the shareholder on things like expenses within the fund. Or how much risk to take on," Mr. O'Leary said.

Some academic research backs up the intuitive argument, with some recent studies finding a positive relationship between the level of manager investment and fund performance.

Morningstar's own research reached the same conclusion. "It turns out that manager investment does have predictive power," Mr. Kinnel wrote in a 2015 report.

Additionally, since the United States started requiring disclosure, the level of co-investment has risen markedly. About 36 per cent of all U.S. equity funds have no manager investment, which is down from 47 per cent eight years ago.

The Ontario Securities Commission, however, said privacy laws prevent a similar requirement in Canada.

That's not much of an excuse, Mr. O'Leary said. "The real answer is just that there isn't the political will to do it right now. Which is a shame."

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