Put passive fund manager giant Vanguard in the same room as a group of active asset managers and you know there will be some fireworks.
In this edition of the CEO Tapes, Vanguard’s Sean Hagerty quotes the ‘brutal' academic evidence that active fund managers don’t add value.
Vanguard's own view he says is that fund manager skill does exist but active managers destroy the added value they generate by charging too much.
Not surprisingly there is disagreement: Jupiter’s boss Maarten Slendebroek says he doesn’t care about the ‘average’ fund manager. We are not ‘average’ or ‘in general’, he says.
Hendrik du Toit (Investec) says that that it is ‘ridiculous’ if people object to him charging a generous annual management charge on a fund that regularly outperforms by a high margin. He adds that some 'so-called index providers' are 'grossly overcharging' their clients.
The Tapes include a discussion on closet tracking, which Aviva’s Euan Munro thought wasn't widespread but was 'immoral' when it happened. Alex Friedman (GAM) said you need to utilise both active and passive with GAM specialising in the hard to replicate active stuff.
The five participants were:
- Alexander S. Friedman, group chief executive, GAM Holding AG
- Hendrik du Toit, chief executive officer, Investec Asset Management
- Maarten Slendebroek, chief executive officer, Jupiter Asset Management
- Euan Munro, chief executive, Aviva Investors
- Sean Hagerty, European managing director, Vanguard Asset Management