I read today the comments for shareholders from the Quilter asset management business (pun in the title intended).
A summary of one section would be that profits have gone up even though inflows fell and assets under management slipped a little due to the decline in market values. Margins have increased and selling off a single asset business (ie a service that offered different funds for different markets segments) will have helped, they say.
In another post I have commented recently that the ‘push’ of multi-asset propositions to retail investors is all about increasing profits for fund managers and advisers. It will be argued that the end client gets a better offering, but the evidence of that is thin on the ground. After all, ‘better’ has to be compared with something and I don’t ever see such comparisons!
This is more evidence of the underlying reasons as to why investors are being told that they now need an adviser (IFA) to tell them to invest with another adviser (asset manager) who will pick yet other advisers (fund managers) to buy them investments. That is 3 levels of fees for one result!
Sounds like the football team with a Director of Sport, a manager and a coach! But quite likely no decent strikers.
Good to hear Not Harry unleashed to give his unrestrained opinions on the workings of the industry he knows from the inside. Not to mention his hitherto unsuspected interest in gardening and knowledge of football.
More seriously I’ve been back reading November’s Pottering About on the patchy performance of Absolute Return Funds and alternatives, though admittedly on a rather short timescale. If a substantial market correction is imminent, is it worth paying fund charges for investments which may well perform no better than cash? Of course timing is everything, if we knew the date of the impending correction we could all make fortunes. The correction could be triggered tomorrow or we could float on in our bubble for months or even years, perhaps?
The objective of absolute return funds is to hedge risk or to somehow make money in all market conditions. Clearly the funds available to retail investors have mostly failed to do that.
However, I have always seen such funds as an insurance policy option, so don’t object too much if they underform cash for long periods, as long as they make money when markets sell off. That will more likely happen with the long/short variety as opposed to the multi strategy or market neutral variants. On several past occasions, James Cluney’s Jupiter Absolute Return fund has done just that, made money in a falling market, but even he struggled in late 2018.
There are alternatives now to pure absolute return funds, such as JP Morgan’s Global Macro Opportunity fund and some so called macro bond funds (which are often taking currency bets to get the desired hedge effect).
NotHarry defised his own low volatility mixed portfolio as a result of dissatisfaction with AR funds when he worked as an IFA and it did what it said on the tin. The low volatility example on the website has some similar characteristics, duly updated to early 2018 and up for review shortly!