GLOBAL - Pension funds want fund managers to take a long-term stake in their own funds as a sign of confidence in their own products, according to Will Rowson, chief investment officer at ING Real Estate.
"Almost every investor expects some kind of alignment now," he said in an interview with IPE Real Estate.
"If you believe in the product you're selling, you'll be willing to co-invest. Co-investment is the current industry buzzword - but it's true most investors want alignment of some kind from fund managers."
Despite alignment- derived from private equity and opportunistic funds - gaining ground among pension funds, there is no standard model for co-investment.
Rowson cited the Morgan Stanley model, which comprises alignment at director and fund manager level. Investment staff pool a percentage of their bonuses earmarked for investment in the bank's funds.
"To the investor, it looks great because it aligns the success of the fund with the success of the business," said Rowson.
ING Real Estate is currently exploring a variation on the Morgan Stanley model that will align fund managers, board-level managers and portfolio managers with their funds.
"A percentage of each year's bonus will go into the pool and be paid three years later," he said, claiming the move would "keep people in place longer".