Money managers under the microscope
By Ed Moisson, Head of UK & Cross-Border Research at Lipper
Do independent asset managers perform better than bank-run funds?
Lipper was recently approached to analyse the difference in performance between funds operated by broader financial services companies (banks and insurers) and those managed by ‘pure play’ asset managers.
This research came in the wake of comments made by Peter Hargreaves, founder of IFA Hargreaves Lansdown, who said in September that many funds in the UK run by banks were “seriously crap”.
With the temperature apparently rising, it might be a little foolhardy to enter such a debate. Yet objective analysis is surely where independent fund researchers can best provide a useful contribution. Besides, it might be gettin’ hot in here, but I for one will not be takin’ off my clothes.
For those wanting the details of my approach, please scroll to the foot of this article. For those with shorter attention spans, we can cut to the chase and reveal that for ‘pure players’, or what are sometimes called independent asset managers, the greatest proportion of funds were most commonly in the first and fifth quintiles (the worst and best relative performers), presenting a u-shaped curve for the distribution of these groups’ fund returns. This pattern was most pronounced for 3- and 5-year performance, while over 10 years the differentiation between quintiles is smaller.
.. Some select phrases from this morning’s Daily Mail pop at greedy fund managers who rake in fees whether or not they’re beating the market. It might read a bit like an advertiorial for passive managers like Vanguard (which gets an unusually high number of prominent name checks) but it won’t be comfortable reading for other asset management execs.
The paper’s salvo gives a kicking to firms like Axa and Henderson and makes much of the secretive pay packages earned by the fundies and the marketeers. It also, somewhat bizarrely reckons the grey-suited long-only managers looking after your ISA are responsible for most of the yachts bobbing gently in the Marina at Monte Carlo.
There’s potash in them thar hills… and maybe sometime soon we’ll be wondering aloud whether potassium carbonate (thanks: Wikipedia) can push on to $2,000 per ounce. In the meantime, the buzz around fertiliser stocks has driven agriculture funds to some eye-catching outperformance.
We’ve taken a look at performance in August among equity funds available to buy in Britain. Stuart Winchester’s Thai equities fund is putting others in the shade, and a few gold funds are dotted about near the top of the rankings, but we liked the story behind the agri funds’ outperformance, riding on the back of a wave of M&A activity. You can read the story here.
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
Will ETFs replace hedge funds?…. No – Seeking Alpha
Hintze the Prince’s philanthropist – Bloomberg
Hedgies to top stocks, bonds in 2010 – Reuters
Calpers probes hedge fund advisors – LA Times
Managed futures on the rack – Reuters
One thing that the credit crisis has demonstrated is that even performing well isn’t always enough to stop investors in need of cash from taking their money out of a hedge fund.