Double-fault hits Edberg’s investment play

Former tennis star Stefan Edberg and other co-owners of Sweden’s Case Asset Management have been hit by a foul call after it was revealed the manager may have hidden higher fees stemming from investments in its own funds.

The practice of a manager’s funds investing in each other is legal in the Swedish funds market, as long as investors are fully advised of the ramifications of such investment activity – including any additional indirect costs. However, it is understood following an investigation by Dagens Industri that Case did not ensure all such information was fully shared with its investors.

Today the company responded by stating that it would move to charge investors so-called ‘double fees’ were this to happen again in future. Investors may have been paying this already, but without necessarily being told about it.

The problem stems from the decision to allow the manager’s Case fund to invest in two other products; Fair Play, which invests in a mix of equity and fixed income, and Safe Play, which invests primarily in fixed income.

The Case fund is chiefly allocated to Swedish equity. However, it is allowed by its mandate to improve its liquidity position if the manager feels that there is more uncertainty in equity markets. The manager argues that by putting investors’ capital into the other funds they got a better return than they would have by having cash in the bank.

However, because of the performance related fees structure operated by Case AM, investors would have paid for management of their capital in the Case fund, but then also subsequently paid for the performance noted by the other funds. Safe Play was launched in January 2011, and reported a return of 3.29% in the half year to 30 June. Fair Play gained 2.95% during the period.

The Case fund offloaded its holdings in Fair Play during the autumn of 2011, and in Safe Play during January 2012, the manager said.

To read the full statement from Case AM click here:


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