No sooner is one asset class flying then another is falling off a cliff
Asset managers who run investments in a wide range of asset classes run the risk of being jack of all trades, master of none, according to Katherine Garrett-Cox, chief executive of Alliance Trust. Multi-assset management is “a tall order”, she says.
“With multi-asset, no sooner is one asset class flying than another is falling off a cliff. It is a challenge to do well.”
Her recommendation is to find what you are good at and stick to that. “When you have something relatively straightforward, you can really shine and people know what you stand for.”
Party on: Linzi Stoppard from Fuse
The party atmosphere was definitely lacking in Monaco this year for Fund Forum. Numbers were down and the usual lavish entertainment had been credit crunched. Still, the organisers professed themselves pleased with the turnout, and with the numbers of chief execs who turned up to sit on panels or address the conference.
Some providers were still doing things in style, but they were mostly the asset servicing arms of the banks. I enjoyed an evening at a swanky hotel by the sea courtesy of BNY Mellon, including a performance by electric violin duo Fuse. It was just right for Monaco!
UK is bringing out its big guns
The UK is bringing out its big guns in an attempt to shoot down the European Commission’s proposed rules for alternative investment fund managers.
In Monaco, Dan Waters, asset management sector leader at the Financial Services Authority, fired broadsides at several aspects of the directive in a speech at the Fund Forum conference.
Fund Forum in Monaco: numbers are significantly down on previous years
Anecdotal evidence has it that attendance at Fund Forum in Monaco this week is significantly lower than in previous years. Some say numbers have halved. Last time I came, two years ago, it was certainly much busier. But what is lacking in quantity is made up for in quality, apparently – the CEOs are here in force.
So are the service providers. I shared a cab from the airport with a woman from SimCorp, have met today with BNY Mellon and JPMorgan, and turned down meetings with Liquidnet, Clearstream and Swift ( I prefer to focus on fund managers at a fund management conference).
There are plenty of issues to occupy the service providers. One that came up at a session today was the question of depositary bank responsibility. The European Commission has raised the possibility of making depositaries stand as guarantors for fund assets, making restitution to investors if money goes astray. This is in response to the issues raised by the Madoff affair, which in Europe focused on a few Ucits funds that invested with Madoff and awarded the sub custody of assets to Madoff as well, so the money disappeared.
One view I have heard is that there is no point even discussing the outcome of such a move as it won’t happen: the regulators are not crazy enough to expect anyone to stay in the business if they have to provide a blank cheque.
Perhaps they are right. But listening to the debate at the session I attended, it seems there is no clear view in the industry of what needs to be done to clear up the grey area in the Ucits rules the Madoff area highlighted. Is it an issue just for Luxembourg and Dublin or a wider one for Ucits?
Threatening to make major changes to the responsibilities of depositary banks has at least started a debate on the issue.
Edward Bonham Carter was happy to share his wasabi peanuts
It is Fund Forum week in Monaco and I have arrived on a wet Monday evening curious to test the atmosphere, having not attended for a couple of years.
There were plenty of conference goers on my easyJet flight over, including Edward Bonham Carter, chief executive of Jupiter Asset Management. He was happy to share his wasabi peanuts on the flight over, and offered to share a cab from the airport too. Sadly, I had a bag to wait for so had to decline.
We had arrived too late to take advantage of the free coaches the conference organisers are laying on this year for cost-consicous fund managers. Taxi fares are a steep E90 from Nice to Monaco. But the conference moved back here from a trial change of scene to Barcelona last year in response to negative feedback.
With FTfm reporting this week on a barrage of reports about the (relatively) parlous state of the fund management industry and the possibility that revenues will not recover to 2007 levels for five years, I am looking forward to networking with a chastened set of managers prepared to contemplate major change to their business models.
Perhaps, though, they are the ones who are not coming to Fund Forum this year.
Wealthy may enjoy luxury yachts, but they are paying too much for wealth management
Pity the poor private client – well poor is probably the wrong word, but apparently the wealthy are getting a bum deal from many of the advisers and private banks that look after their money.
They pay the highest fees and get the worst performance, according to Alan Miller, former chief investment officer at New Star Asset Management and now partner at Spencer-Churchill Miller, a wealth management boutique.
Mr Miller has seen the light and is using low cost exchange traded funds to build portfolios for clients, as he explains in a video interview. He says making asset allocation calls is the key to making money, rather than picking stocks.
Active ETFs - ready for takeoff
The combination of BlackRock and Barclays Global Investors, now almost a done deal, is likely to give a big push to the development of active ETFs.
These are already appearing in the US, the most recent development being from Grail Advisors, which has plans to bring out single manager active ETFs, having already launched a fund that combines stock picks from three teams of managers. Priced at 89 basis points a year, Grail’s ETFs will challenge the higher priced traditional mutual funds.
Mark Dampier is enjoying the move by hedge funds into the retail investment market via Ucits III. The head of research at Hargreaves Lansdown was wary of absolute return funds when they first appeared. I spoke to him when BlackRock (then Merrill Lynch Investment Management) launched its Absolute Alpha fund in 2006, and he said he would wait to see if it worked before making any judgements.
Lower risk funds “have to be bang on right”, he said at the time.
Now, he is a fan, with the caveat that the absolute return sector is a mixed bag and some funds are difficult to analyse. The BlackRock fund “did what it said on the tin”, he reckons.
Blue-sky thinking needed
The designers of the UK’s new personal accounts, the national pension scheme to be rolled out from 2012, have a great opportunity to shape the way pensions are delivered in future. They could challenge the pensions industry to come up with new ideas and indulge in blue sky thinking.
Or they could stick with standard industry products and hope they work. That seems to be the preferred approach of the respondents to the Personal Accounts Delivery Authority’s consultation on how to provide retirement income.
Investment consultants continue to urge savers to take the risk of stock market investment when investing for their retirement.
Mick Calvert of Watson Wyatt is quoted in an interactive graphic on FT.com dealing with the pension crisis as saying:
“Strategically and looking long term, now would seem to be the time to be putting more rather than less into equity markets if its’ affordable.”
A more considered view comes from Ros Altmann, an independent pensions expert. She says: “There is no financial or economic rule that says just because you invest in the stock market you personally are going to do better than risk-free assets.”
People who want security and cannot afford to take risks would be driven to index linked gilts, or some sort of protected equity investment, she says.
Relying on the equity bet has let down many people close to retirement. Prices are lower now, but there is no expectation market volatility is a thing of the past. So what makes it safe to go back to relying on equities, and how long is the long term?