Fund management, intellectual capital, intangibles and private disclosure

This paper aims to explore how fund managers (FMs) deal with major problems of ignorance and uncertainty in stock selection and in asset allocation decisions.

Interviews were conducted with 40 fund managers in the period October 1997 to January 2000. A seven stage approach was adopted to sift through and process the large volumes of case data. The interview case data formed the basis for identifying common patterns and themes across the cases.

The case data revealed the nature of this private information agenda concerning intellectual capital or intangibles and the dynamic connections between these variables in the value creation process. The case data provided insight into how the book value and market value gap arose and the special role of information on intangibles and intellectual capital in valuing the company.

The fund management behaviour has important implications for regulatory policy issues on insider information, on corporate disclosure, the corporate governance role of financial institutions, and for the governance of financial institutions.

The paper focuses on issues of importance in an increasingly concentrated and global FM industry.