The prospect of living in poverty or at least in tightened circumstances in old age is not daunting British workers.
One in three people currently at work plan to rely on whatever the state provides when they retire, according to research carried out for Baring Asset Management.
The arrival of really expensive funds in the Ucits space, notably those being launched by hedge fund managers, makes the funds run by traditional long-only managers look quite reasonable.
Hedge fund managers are often castigated for their high fees, while even traditional fund managers do not seem to think there is any advantage to offering lower-priced products than their neighbours. Although overcharging is never to be condoned, however, it may be in some cases that the consumer is simply not paying attention to what they are paying for their services.
This week I met some representatives from French independent asset manager Financiére de l’Echiquier, who conveyed a sense of their company as one that ticks all sorts of boxes as consistent, stable, responsible and a good employer.
This disarmed me slightly as I had planned to go in all guns blazing to attack them for what I thought were unconscionably high fund fees of 2.392 per cent a year. That’s fees alone – for comparison, in the UK, the average total expense ratio (fees plus expenses) is 1.7 per cent.
When I finally challenged them, instead of whipping off their friendly masks to reveal the evilly grinning features of Mammon-worshippers grinding the faces of the poor, they looked a bit surprised.
“But those fees are pretty much in line with the average,” was the response, followed by a thoughtful pause. “Do you know, that is the very first time anyone has ever asked about our fees.”
That is after all how capitalism works. You charge as high a price as the market will bear and the European fund market will still bear very high prices.
Pensions bonanza cancelled
Now it’s official – the much trumpeted pension buy-out market has fallen flat. And just to spell it out, a report by Punter Southall called the False Dawn reveals that most (about 84 per cent) pension schemes trying to transfer liabilities to an insurer through a buy-out would find it cheaper to just adopt the same low-risk investment strategy an insurer would use.
Investing in solar power this year generated a loss
Investing in a climate change fund is usually seen to be a responsible thing to do, so surely offering a climate change fund is something a responsible investment manager might do.
Not according to RCM, a fund manager with a long track record in sustainable management and a very successful (in assset-gathering terms) Ecotrends product. It does not, however, offer a climate change fund, because of concern it does not make sense as an investment strategy.
Pension saving is too expensive. According to a report from the Royal Society of Arts, up to 40 per cent of pension savings disappear in fees and costs under the UK’s current system of private pension provision.
Personal accounts, the national scheme to be rolled out in the UK from 2012, are designed to tackle this problem. People will be automatically enrolled into the scheme, removing the marketing and selling costs that have helped make personal pensions so expensive.
But the £3,600 annual limit on contributions to personal accounts is too low, says the RSA report.
Asset managers like to boast of their lovely cushiony profit margins, but their profitability is another matter entirely. According to a survey by SimCorp Strategy Lab, nearly half of investment management businesses are struggling to break even.
They calculate a cost rate by subtracting ebit (earnings before interest and tax) from gross revenue and expressing the result as a percentage of gross revenue. Less than 20 per cent managed to keep that cost rate below 85 per cent, while 41 per cent saw it rise to 99 per cent or above.
FTfm reports the results of the survey but we would like to know what you think. Is asset management industry really this difficult to make a profit in? Is this a reasonable way to think about profitability? And are investment managers really as clueless about cost control as the survey authors think?
As many as half of Mongolia’s 2.7m people rely either on mining or agriculture for a living. Even the most basic economics will tell you this is not an ideal situation, and unlikely to make for a stable and growing economy. They are particularly concerned about the potential for substantial mining revenues to destabilise the economy, a phenomenon known as ‘Dutch disease‘.
So, unlike their ancestors who sought to boost their wealth by raiding outside their own borders, the modern Mongolians have announced plans for a Mongol Sovereign Wealth Fund or Mongol Hoard.
Poul Nyrup Rasmussen, self-styled bogeyman of alternative investment managers
It seems the discussions on the European Commission’s much reviled draft directive on alternative investment fund managers are taking place after the event rather than before, as is usually the case with EU legislation.
The Financial Services Authority, the UK regulator, is focusing on this one topic in its asset management conference tomorrow. This follows last week’s debate, held in London’s Guildhall, between Poul Nyrup Rasmussen, self-styled “bogeyman” of alternative investment managers, and Lord Myners, the UK’s City Minister.