Transparency is a term that dominates in the business world. A good business leader, at the helm of their organization, promotes transparency with the hope that their organization will thrive as a result. Transparency also is a term in vogue in the investment management industry.
Investment advisory clients can easily become accepting of investment decisions made on their behalf with only a vague understanding of the expected investment return, total costs, and risks associated thereon. A lack of financial sophistication might preclude them from being able to ask the “right questions.” Consequently, this causes a feeling of vulnerability, which, in turn suggests that a high degree of trust in the investment adviser is needed. With an adviser that uses best judgement grounded in solid ethics, this is a good thing. However, this leaves a window of opportunity for advisers who do not abide by these same ethics to take advantage of a situation for personal gain.
A recent Reuters article has circulated shedding light on a New York hedge fund’s decision to withdraw services from the Kentucky Retirement Systems pension fund (Reuters Staff, June 2018). The decision came as a follow up to a recent standard now imposed on money managers in the state of Kentucky that are managing state employee assets, that emphasizes ethical, educational, and professional standards and practices. These standards and practices are promulgated by the CFA Institute.
At Sigma, we subscribe to this Code of Ethics and Standards of practice and place our client’s best interests at the forefront of all we do.
All comments and suggestions are welcome.
Daniel J. Robinson