The FundForum in Monaco is not always about celebrating the success in the industry. More often than not, speakers point to problems and trends which are in general not healthy for the fund industry.
Therefore, it might not be an unusual place, but still unusually strong words which Christophe Caspar, the global CEO of Edmond de Rothschild AM, said in Monaco. According to an article by IGNITES, he said,” Asset managers are creating problems for themselves and their clients by focusing on new product launches as a way to tackle squeezed margin.”
Caspar said also, “That he expects to see more product launches than ever before over the next five years as asset managers race for the future.” He continued, saying, “That’s actually ultimately dangerous because asset management is about a few things really well and not a zillion things that are average.”
Philip Kalus, Managing Director at Acolin Intelligence, always says that asset managers should stick to their guns and not change them. If an asset manager is known for excellence in asset class A, it may look tempting for them to roll out a similar strategy for asset class B, but if this new strategy delivers only mediocre results the asset manager puts its reputation on the line. The European fund market is a very crowded place which is not waiting for the next mediocre fund.
Less, but high conviction and high quality, can be much more.
I couldn’t agree more with these two statements. A launching spree often leads to a higher number of fund closures and mergers three to five years later. This is a result which helps nobody. Investors might be disappointed and the fund promoters may still lack the earnings they were looking for when launching the new product.
From my point of view, asset managers should do an honest product review on why an existing fund or ETF is no longer selling well. If it is the performance, the asset managers should support the portfolio manager to return to his old strengths. If it’s the fees and expenses the asset manager should adjust them so not all of the alpha generated by the portfolio manager gets absorbed by the TER.
If there were changes in the organizational structure, the asset manager may want to return to the old model since the new model may have negative impacts on the customer’s outcome.
The views expressed are the views of the author, not necessarily those of LSEG.
This article is for information purposes only and does not constitute any investment advice.
