C
clactuary
Member
Hi,
I'm struggling to follow the bold text in the following piece of core reading (page 7, Chapter 19 of CMP):
"Some companies may allocate smoothed investment returns to asset shares. Bonuses derived from these asset shares would automatically allow for any smoothing policy. However, this would mean that asset shares allowing for both smoothed and unsmoothed investment returns would need to be monitored to understand the smoothing costs as this approach would not automatically result in smoothing costs which were neutral to the fund. Unsmoothed asset shares are also required in order to monitor payouts relative to target range"
Why would a company allocate both smoothed and unsmoothed investment returns to asset shares? If smoothed investment returns were just allocated, would that be smoothing cost neutral to the fund?
Appreciate any help.
Thanks in advance, Clare
I'm struggling to follow the bold text in the following piece of core reading (page 7, Chapter 19 of CMP):
"Some companies may allocate smoothed investment returns to asset shares. Bonuses derived from these asset shares would automatically allow for any smoothing policy. However, this would mean that asset shares allowing for both smoothed and unsmoothed investment returns would need to be monitored to understand the smoothing costs as this approach would not automatically result in smoothing costs which were neutral to the fund. Unsmoothed asset shares are also required in order to monitor payouts relative to target range"
Why would a company allocate both smoothed and unsmoothed investment returns to asset shares? If smoothed investment returns were just allocated, would that be smoothing cost neutral to the fund?
Appreciate any help.
Thanks in advance, Clare