The Asset-Management Pressure Cooker – Bloomberg Gadfly
March 3, 2017 \ 3 Comments
Full Article: Bloomberg Gadfly
Behemoth investment firms, from Fidelity to Vanguard to BlackRock, are locked in fierce competition to attract assets, even if that means dropping their fees closer to zero. The result has been increasing strain, borne in large part by asset-management employees, who are being laid off or paid less.
It seems like a pretty inevitable path but asset managers have enjoyed an unprecedented growth in assets and revenues for a while. Market rallied all around them and we went straight line tighter for the last 5-6 yrs. It is easy to say just use index funds. So perhaps the generic index following will be commoditized but skill in asset selection is a lot more important in times of increasing interest rates which is upon us so I wouldn’t count active management out just yet.
This article highlights some interesting asset management developments over the last few years: 1. The outcome of increasing correlation of markets & asset classes’ behavior – diminishing the attractions and ability of active funds to provide attractive returns over passive funds/structures – increasing the proportion of funds into trackers/ETFs. 2. Outright yields/returns diminished in most markets off the back of low central bank rates policy shining a spotlight on fees as being a material detractor to performance (especially cumulatively over a few years). 3. Post-Madoff world of compliance rigour seriously impeding even highly performing active managers to break through $200MM… Read more »
Good points all. I would add govt intervention skewing fundamentals has made it harder to realize active mgmt gains.
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