Funds Hub

Shocking.. Toxic.. Nasties.. Devastating.. Leeches..

.. 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.

It has been a long-running war of words since the financial crisis and it’s fair to say that active managers who fail to deliver do look increasingly isolated. It has been an immensely difficult market to call and more than ever outperformers have a patina of luck around their achievements. People like ‘safe-hands’ Philip Gibbs have stumbled and Neil Woodford’s jammy sale of BP at the end of last year has been the engine behind a rally back from ho-hum performance.

For balance, the Mail does note that index funds will, by definition always tend to underperform the benchmark once fees are taken into account, but nevertheless, the passive houses have reaped the benefits and have even started to devise ways to hold onto the money which gravitated their way in the market’s darkest days.

Some active funds, meanwhile, have sought to re-align themselves with their skittish customers by shifting the weight of charges towards performance fees, earned on positive returns, while some brave souls have allowed clawback of fees in down years.

Our own funds research firm Lipper has run the rule over the evolution towards performance fees and has produced a report which I’ve copied below. Their conclusion is pretty clear: performance fees in themselves do not solve the problem; if you really want to win back the clients, then you have to become  a client.

In other words, stick your own money in, and manage it like your life (actually) depended on it.

Did Neil Woodford cause the BP oil slick?

Well, no. Of course he didn’t. And if pressed, he’d probably rather the southern seaboard of the United States wasn’t slowly turning into a necklace of slippery brown beaches.

But he is one of very few to benefit from the avalanche of political opprobrium, escalating costs and reputational damage that has engulfed BP in the last month, sending the shares 30 percent lower and leaving the pension pots of poor grans and grandads looking markedly less healthy.

Woodford, of course, sold out of BP (and Shell), back in October last year. Not in anticipation of a sunken Gulf of Mexico oil rig and a tough-to-tap pipe head, but for fear of tumbling oil prices and rising exploration costs.

Over the last month he has reaped the benefits of that call. His funds are the only ones in the UK equity income sector to turn a profit in the month to close of business on Wednesday.

Lipper data shows his High Income fund was up 0.6 percent in the period; the average income fund was down 3 pct.

You can see an overview of the fund here. Or buy the new all-singing, all-dancing Thomson Reuters Eikon platform for an in-depth look at relative performance and allocations.