Investors love talking about ‘skin in the game’. It has become something of a truism that a fund manager with substantial sums of their own money invested in their strategy will make better decisions. Not only is this a dubious generalisation but it also overly simplifies what can be quite a messy incentive problem. Skin in the game is an important idea but also one we can get wrong by misjudging where it exists, what it is telling us and when it might be a problem.
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