Investor confidence was back, that was for sure. But it was no longer as simple as promoting the best-performing fund through the financial pages of the broadsheets and waiting for the cheques to roll in. Today’s investors – and their advisers, for that matter – were a cannier group altogether.
For a start, the sheer range of funds you needed these days was so much wider than used to be the case. When he first placed his foot on the career ladder, investing in the US was considered exotic. Investment management had been the poor relation then. Broking had been the business to be in. Thank heavens he had seen the light. He might not have made as much money as he would if he had taken his father’s advice and moved into the corporate finance department of a merchant bank but he had enjoyed a better quality of life than all those deal junkies, even if there were mega-bonuses as a reward.
It had all felt simpler then. Not that his present team of double-first Oxbridge over-achievers would necessarily agree. Discussing the intricacies of overseas investment with a fund manager who regularly used hedging techniques to leverage returns on a portfolio that ranged from Algerian hotels to Zairian copper mines, the thought that foreign currency transactions could have been so restricted until the start of the 1980s had resulted in a throwing up of hands and a statement that no manager could have operated in such conditions.
What would that team of aspirational wealthbuilders of the mid-1970s make of a fund range that embraced commercial property, Asian equity income, total return portfolios, income enhancement through option writing, sophisticated debt instruments and hedge funds, not to mention the guaranteed and structured products now on offer? Simple? Not in the context of a long-only, domestically-focused manager as he had been.
Moreover, the client base had changed out of all recognition. The growth of wrap platforms and fund supermarkets with their risk-profiling tools and portfolio construction kits, not to mention the fund of fund multi-managers, demanded greater attention to delivery against expectation and a defined return specification. Disappoint and large swathes of your fund could be dumped without so much as a by your leave. Bring back the good old-fashioned private-client stockbroker but they were a dying breed.
What of the future? This was always the most difficult call to make. Who could have foreseen the major changes in the nature of the fund business, not least in the way in which regulation played such an important part? But in the end, it was all down to how the market behaved and the psychology of the end investor. Thanks had to be given that calm had returned to markets after the upsets of the new millennium kicked in.
The draft profit figures confirmed his view that strong markets made for strong profits, whatever part of the securities and investment industry you were in. It was all well and good building a range of funds that delivered non-correlated returns but it needed confident investors to take the step and commit money.
What if the pessimists were right and the next bear market saw all asset classes turning down together? It did not bear thinking about. But with so much cash swilling about, that did not look in prospect. His mood brightened. Even if the developed West became net sellers of investments to fund their retirement, the East would deliver a new generation of investors. Thank heavens for the new Beijing office.
Brian Tora (email@example.com) is principal of The Tora Partnership