Funds Hub

Money managers under the microscope

Passive, aggressive

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CHINAThe days when active managers could ride a market rally and charge high fees for doing so could be drawing to a close. Passive managers are hoping to paint their active rivals into a corner by delivering better than market returns at a lower cost. The development of so-called “smart beta” products based on non-traditional benchmarks is expected to force active managers to sharpen up or get out of the game.

Fundamental indices, which use a variety of criteria to weight stocks, and minimum volatility indices, are beginning to gain traction with institutional investors.  The latter, developed by MSCI for fund firms running managed volatility strategies, aim to deliver close to market returns but with about a third less risk, giving a better return per unit of risk, thereby improving the overall efficiency of an institutional investor’s portfolio.

Smith attacks hedge funds’ 2 and 20

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Here’s the link to Terry Smith’s blog attacking the “unsupportable” practice of hedge funds charging their clients fees of 2 and 20 (2 percent annual and 20 percent performance).

Smith compares the maths that show a $1,000 investment in Berkshire Hathaway in 1965 (when Buffett began) would last year be worth $4.3 million, with a hedge fund charging 2 and 20.

from Reuters Investigates:

Dubai comeback already?

UAE

We went behind the scenes of Dubai's debt debacle last November and found a much more sober city-state starting to rebuild itself from the $59 billion hole that was dug by the whizz kids who had powered its transformation. Loans don't come as easy -- particularly the nod and the wink of association with the royal family isn't cutting it like it used to.

Some people see a connection between the crisis and the fact that Dubai has also started to tighten up on its trade with Iran, in line with broader international sanctions, but we're not so sure about that.

from Reuters Investigates:

Morbid money-spinners

If the life settlements market seems ghoulish, here’s a British scandal which isn’t doing the image of the business any favours. It’s one of the worst the country’s seen.

Around 30,000 mainly elderly investors in the UK put their money into a company called Keydata, hoping to make a little extra cash to fund their own retirement with the promise of a healthy return.

Morning line-up: Asian solar, bonds and correlations

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News and views on the fund industry from Reuters and elsewhere:

RTR1SGF8Lands of the rising sun – Reuters

Bonds. Bubble? – Telegraph

Chasing the dream – Reuters

Don’t take it personally.. – Belfast Telegraph

New bid to solve hedge fund rules row – Reuters

Correlation swaps.. – FT Alphaville

Regulator turns eyes to annuity bets – WSJ

IMA responds to Cable’s City criticism

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Is short-termism wrong? And can it be eradicated from markets?

An interesting view from IMA CEO Richard Saunders on Vince Cable’s controversial speech this week.

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