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Peter Hargreaves-backed firm hits out at 'active' fund managers

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Peter Hargreaves-backed firm hits out at 'active' fund managers

The fledgling fund boutique backed by Peter Hargreaves (pictured) believes active fund management is stuck in the dark ages. 

Blue Whale Capital, founded by former Artemis fund manager Stephen Yiu last year, hit out at the 'opaqueness' of active fund costs, saying investors have little idea how managers justify their fees. 

Yiu (pictured below) feels the industry standard of monthly factsheets - outlining a process in the loosest terms, top 10 holdings, and a 'mundane' commentary - is no longer good enough. 

'Investors should demand to periodically see some of the research the fund manager has done so they can see the level and type of work that determined how their money was invested,' Yiu said. 

'If a fund manager cannot or will not produce this research, then an investor should ask some serious questions.' 

These, Yiu said, should include asking fund managers whether they are actually doing proper research, and how active they really are. 

'There is a suspicion investors may be paying for someone to sit in a fancy office all day, doing very little and randomly buying stocks on a whim,' Yiu said. 

'There are far too many funds who brand themselves as "active" who don't do proper research and are letting down the industry. With the rise of ETFs and passive investing, it is imperative that truly active managers explicitly show investors what they are paying for and call out "the bluffers" who don't justify the fees. 

'Imagine being asked to pay an architect to design your new house but never being allowed to see any of the drawing or plans. The house may turn out well or it may turn out badly, but you've no idea what the architect has done to achieve the end result, and therefore no idea whether they were worth the money you paid.' 

Yiu comments come at a time the funds industry finds itself under intense fee pressure.  

At the end of March the Financial Conduct Authority will give guidance on how it expects asset managers to respond to its scathing review of the industry in 2017. 

Earlier this month the financial watchdog ordered a series of fund firms to return £34 million to investors in a crackdown on 'closet trackers'. 

Yiu described how Blue Whale intends to set an example to the industry, sharing its research with investors through its website

'[Currently] we have published our research on Electronic Arts and PayPal, both constituents of our top 10, and more will follow.

'We work incredibly hard and perform significant amounts of research on all the investments we make on behalf of our investors. We also welcome questions each month.

'So our challenge for investors is this: if you have investments in other funds, email them and ask to see some of their research. If they refuse to provide any you should ask some serious questions about what you are paying them to do all day.'   

Hargreaves, who made a fortune from his fund broking business Hargreaves Lansdown, helped Blue Whale get off the ground last year by pumping £25 million into the business. 

The firm subsequently launched the global equity LF Blue Whale Growth fund, co-managed by Yiu and Robert Lloyd, in September. The vehicle invests in a concentrated portfolio of 25-30 stocks and holds £44 million in assets, according to its most recent factsheet.  

 

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