FEW people outside the investment management industry will have been dismayed to learn that chief executives of some of the sector's top listed-fund houses have had their pay cheques cut dramatically. But what should alarm everyone is what has provoked this drastic pay cut.

Chief executives of the leading fund management houses concerned have been living high off the hog from fat commissions while delivering a decidedly sub-par performance to investors. Now, those investors have turned on the managers, voting with their feet and deserting in droves.

The situation came to light originally from a rather unexpected source. S&P Dow Jones Indices presented a report last week to a conference in Tokyo showing that so-called "active" investment funds had been greatly underperforming "passive" funds for many years.