Funds Hub

Money managers under the microscope

Envy, desire and basis points

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I would like to tell you a story. It’s one about the tempestuous relationship between fund managers and their investors, a tale of envy, desire and basis point negotiations. You may have spotted by now that this is not the plot for this season’s latest blockbuster.

My story has recently gained a little extra spice with two old-fashioned heroes riding into view. One from the West – Omaha - and the other from the East - well, his father hailed from Russia – with both willing to make a little less money in order to help their fellow citizens. Warren Buffett and Stuart Rose are not alone; others in France and Germany are also saddling up. These horsemen seem to be heading in the opposite direction from those in the European funds industry.

There is one aspect that I’d like to look at to explore this: the fees generated by funds in relation to their assets. And in this case Europe and the US look pretty different.

One of the implicit benefits of investing in a mutual fund is that investors enjoy lower annual charges as a result of a fund’s success in increasing assets, in other words that costs fall as more investors join – economies of scale.

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