By Scott Ronalds

Financial Post journalist Jonathan Chevreau wrote an interesting piece yesterday on Morningstar Canada’s new Stewardship Grades. The article highlights an attempt by the Investment Funds Institute of Canada (IFIC) to discourage Morningstar from releasing the report.

Chevreau notes that IFIC has serious concerns with the report, and in a two-page letter their president attacks Morningstar for its belief that fund companies should disclose information concerning fund manager compensation and co-investment, among other issues. Interestingly, Chevreau goes on to note that not all IFIC members agreed with the letter.

While these are understandably touchy issues, we side heavily with Morningstar in that they deserve more attention and transparency.

When fund managers look at a potential investment, one of the things they focus on is management. They want to know how much of the company the management team owns, how much the key executives make in compensation, and what they hold in terms of stock options and other benefits. Put simply, they want to know how “shareholder-friendly” the management team is to determine whether their interests are well aligned.

Shouldn’t mutual fund investors consider similar measures for those that are managing their money? Wouldn’t you want your manager to have her money invested alongside yours?

We certainly think this information is important, as do several other companies who scored favourably in the Morningstar report. Presumably, these companies didn’t agree with the IFIC letter either. It looks like there’s some drama brewing in fundland.