It was great to share my views with Simon Hoyle the other week about the challenges fund managers are facing in the current environment, much of which is not well understood by the adviser market in Australia. We talk to a lot of managers entering the market. They might have a mandate or two with a super fund or institution down here, and they look at the advice space and once they understand the fee environment, particularly for capacity-constrained capability, they don’t come back. #fundmanager #investmentmanagement
Brian Long
7mo
Great article David. An issue is also the continual outperformance in equities of various indexes (and sub index ETFs) v managed funds- who have not wanted to chase the consequences of QE, Fiscal Stimulus, RRP, artificial low rates etc so have positioned their products according to their beliefs. In other words the market hasn’t had anything much to do with economic reality. And I have not seen many active DFI mangers who could pick the vaguaries of the duration/credit/etc markets in this period either- even long duration experts keep getting wrong footed by such things as implicit Yield Curve control and cannot justify a big duration bet either in Aust or overseas. Again perfectly understandable. Another issue is the sheer volume of sub index ETS - and often lack of understanding of what is in them- such as quality ETFs being overweight US and technology. So many advisers see this as active management when it is not. I fear we will need a correction that will bring back the value of active management.
Partner, Spire Capital
7moVery valid comments David. Well done for putting them out there. Having viewed this from the inside for a long time, this pressure is forcing underwhelming and overpaid managers out of the game (that said, too many are still holding on) BUT has the unintended consequence of squeezing out quality at the same time. Australia’s asset owner obsession with fees absolutely has to shift back towards net risk adjusted returns. It’s the only thing investors can eat and is the ultimate determinant of quality.