Asset manager fears industry is losing focus

 
Tim Wallace
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THE ASSET management industry no longer looks after consumers, instead simply aiming to sell products, industry group the 300 Club argues in a paper published today.

The influential group accuses the industry of failing to boost savers’ investments, lagging the market as a whole and failing to consider the core purpose of their business.

“A growing body of opinion suggests that asset management in its current form adds little value. By far the lion’s share of global savings is controlled by financial conglomerates,” said Kempen Capital Management’s Lars Dijkstra.

“Many of them have a short-term focus within an activity they do not even consider their core business. Of the investment funds that are actively managed by the conglomerates, the long-term performance of the majority lags behind the index. Apparently, they fail to convert our savings into profitable production capacity”.

The group’s research suggests the larger an asset manager becomes, the harder it is to outperform the market – yet investors often choose their manager based on reputation and size. And that problem is compounded by the addition of transaction and management fees, the new paper believes.

Marketing by such firms is also often unhelpful, the 300 Club’s paper argues, as it is short-termist and simply promotes “yesterday’s winner” rather than a product which will help the client the most.

“As a result of an excessively short investment horizon, index-hugging and transaction fees, most investment funds fail to deliver added value after active fees,” the paper claims.

“Before long, this approach will leave the client disillusioned with disappointing absolute returns.”

As a result, the industry needs to focus more on long-term commitment, as well as better alignment of fund owners’ and employees’ interests, Dijkstra argues.