Asset Managers
The Asset Management Market Study, MiFID II and a number of other developments are having a fundamental impact on the retail asset management market
The FCA now require an “All-In” fee which includes estimated transaction costs and which is communicated clearly to investors. Second, they want fund objectives to be spelt out clearly to potential investors and the performance to be compared with those objectives. Third, they are looking to fund managers to demonstrate the value they bring to individual investors. The industry has received some unwelcome feed-back as clients receive their detailed MiFID statements containing some of this information. Perhaps even more important, some “star” managers have been losing their lustre and it looks like Woodford – the previous brand leader – has caused serious damage to the active manager brand. To cap it all, by the end of 2020, a couple of highly regarded property funds suspended redemptions due to a lack of liquidity.
The FCA reported some time ago that: “Our evidence suggests that actively managed investments do not outperform their benchmarks after costs and that some active funds offer similar exposure to passive funds, but charge significantly more.” Clearly, the future looks dim for players that cannot demonstrate consistent value. Further consolidation looks inevitable. But if the Standard Life and Aberdeen Asset Management transaction tells us anything, not all consolidation provides benefits to all (or any) of the stakeholders – to say the least!
Interestingly, we are already seeing some asset managers moving into additional sections of the value chain. For example Schroders; who have followed up their investment in Nutmeg, with another investment into distribution and underlying technology investment via Benchmark and the announcement of a joint venture with Lloyds Bank in the wealth management space. Many others are acquiring IFAs or planning to do so. Will these be “marriages of convenience” or marriages of inconvenience? I think most will be the latter!