Money managers under the microscope
“A game of two halves” is a footballing cliché in the UK, but was particularly apt for the European funds industry in 2011. The stock market falls that began in July not only ended the healthy sales activity that had started the year, but triggered a wave of redemptions that rolled through the industry. While these outflows ebbed slightly in the final quarter of the year, there were few who did not feel the cold chill of investors withdrawing from mutual funds by the year-end.
Net sales of long-term funds (i.e. excluding money market funds) in 2010 (305.8 billion euros) exceeded not just those of 2009 (257.7 billion), but also the level achieved in pre-crisis 2006 (265.9 billion). Expectations were therefore high when the first half of 2011 saw inflows of 96.1 billion euros, but this was followed by outflows of 155.9 billion, so that the year as a whole ended in the red (-59.8 billion) for only the second time in a decade (the 2008 total was -391.4 billion euros).
Giving investors the motivation and confidence to move money out of deposits and into funds amid the ongoing political and economic maelstrom remains a crucial challenge for asset managers.
But a longer term view is also useful in fully understanding the current status of the industry and the dynamics that have been at work to shape its current structure.
“The long is short. Investment choice, like other life choices, is being re-tuned to a shorter wave-length.” So stated Andy Haldane of the Bank of England in a speech last month.
If one of the key features of a mutual fund is that it is a long-term investment, then concerns that money is being managed over decreasing time horizons should be treated seriously.
By Jim Saft
HUNTSVILLE, Ala., March 10 (Reuters) – Patience, particularly in investing, is one of those virtues everyone praises but for which no one seems willing to pay.
Leading investors around the world barely changed their exposure to assets in August, trimming equities slightly in favour of bonds, where they loaded up on top-notch corporates, Reuters polls showed on Tuesday.
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We hear German hedge fund K1 and its boss Helmut Kiener have attracted the attention of prosecutors, so it’s worth dipping into the hedge fund performance numbers to see what all the fuss is about.
Below is a chart from the K1 website showing the serene progress of Kiener’s “K1 Fund Allocation System” until the financial crisis sparked an unprecedented wobble that was quickly righted. The total return since inception though, is still comfortably above 800 percent.
Despite last year’s record poor performance from the hedge fund industry, Britain’s second-biggest pension fund is sticking with a mission to double its allocations to hedge funds and private equity to 20 percent.