Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/wealth-manager/article/a708698
Benchmark-plus funds worth no more than 55bp says Rathbones
by David Campbell on Oct 11, 2013 at 08:03
Benchmark plus funds have post-RDR pricing power of no more than 50-55bp says Rathbone’s multi-manager boss David Coombs, predicting major consolidation of the funds industry.
But he added that the company would use its weight of capital to gain ‘favoured nation status’, essentially guaranteeing access to funds on the same pricing structure offered to other institutions.
‘I suspect pricing will settle at 65-75bps for the most talented managers and for an index +2% fund it will be around 50-55bp,’ said Coombs, who heads the Rathbones multi-manager range.
He said that ultimately fund groups would find that cutting exclusive deals would hand out too much power to distributors and backfire.
‘It’s a situation like the farmers with Tesco. Do you really want to go out there in the market and tell everyone that you are giving preferred status to one of your customers?
‘Fund management groups have had it very good for a very long time and there has been very little differentiation between good and mediocre management. There is a reason why [fund groups] are struggling to come to terms with this and that’s because there has been a lot of cross subsidy.
‘They now have to find the sustainable balance between distribution and volume and premium pricing. I don’t want to pay a cross subsidy when I am buying a fund.’
He predicted a major consolidation in the asset management sector, pointing out that the US asset management industry has already gone through its own significant disruption on pricing. But he said that a lot of the basic architecture of the industry no longer made sense and would be torn up.
‘It’s caught people out. A lot of remuneration models do not work anymore – sales have been incentivised by volume and that is now coming out of fixed costs.’
News sponsored by:
Today's top headlines
More about this:
Look up the shares
Look up the fund managers
On the road
by Danielle Levy on Dec 04, 2013 at 11:37