In Europe, the respective gains are 36.6 and 52.6 per cent. There is no reason why this situation should last beyond the influence of the particular factors which are driving it but it is nevertheless influencing fund manager behaviour.In an environment where the bulk of the market by capitalisation is underperforming, the market has been easy to beat. With success apparently at their fingertips, fund managers have shown new confidence, expressed in a rash of high-performance, higher-charge fund launches. If this really reflects a new and lasting ability to source alpha, it is very good news indeed. However, if what we have seen is managers taking advantage of a capitalisation-based beta stream, the superior returns may not be as long lasting as we would hope. The problem of finite achievable alpha is being recognised in some parts of the industry, particularly the institutional world, where some managers have closed strategies to new money. Most of the managers that have followed this path have been using some form of quantitative approach where estimates of available information are more readily compiled. Clearly, in the world of open-ended products, closing a fund to new business isn’t on but some attempts have been made to reduce or curtail inflows by soft-closing funds. Despite the challenges, there is certainly good demand for higher-risk, higher-return funds. Usually backed by an individual with a good record, the assumption is that past returns have been held back by deliberate limiting actions which will not be imposed on the new mandate. But for these returns to be achieved rather than simply targeted, they have to be available and on a consistent basis. This might seem a strange point to make but it makes sense on consideration. If we believe markets to be reasonably efficient most of the time and we then constrain information flows to ensure no unfair advantage, how can a manager expect to beat the field by enough to justify the alpha fund tag? Take the US market, for example. If news breaks that will impact on Wall Street, somebody will be up and awake to see it. The earnings potential from the market attracts the brightest and best, keeping intellectual competition at the highest level. If the key to outperformance is finding and exploiting information not known to others, how can an investor beat the index consistently and by a substantial amount? Risk can be increased easily but there are no guarantees that returns will rise. Alpha targets should be set to reflect the characteristics of the market and not the hopes of the fund provider. A multi-manager setting a mandate or an IFA buying a fund must hold in mind not just the chances of a manager doing well but also whether the market can realistically support the targets.
Lighthouse is to offer its advisers a four-day crash course to become certified financial planners.The firm, which has over 500 advisers, plans to provide the service from September across its four brands as a way of increasing professionalism among its members.Lighthouse Wealth & Group Training director Jerry Price says the development of its bespoke technology […]
A former Sesame member is looking to set up an ex-members’ action group after the network refused him access to his client files to help him fight a complaint. Hartlepool-based Independent Financial Services principal Jim Gillespie is calling on former and retired members to band together and pressure Sesame into allowing them to access their […]
Norwich and Peterborough Building Society chief executive Matthew Bullock has been elected Chairman of the Building Societies Association for 2006-2007.
Former AWD Group chief executive Douglas Gardner has joined Positive Solutions as distribution director. Aegon head of risk Graham Dumble has also joined the board as a non-executive director in a management reshuffle that sees sales director Chris Smallwood and compliance director Chris Davies leave the group. Positive Solutions revealed last week that David Harrison […]
By Jamie Clark, Business Development Manager The pensions revolution is almost upon us. As with any revolution, there will be winners and losers. The winners in this case could presumably be the politicians that orchestrated pensions freedom and choice just before the general election. As for the losers, there may be many thousands of people […]
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The Financial Ombudsman Service has appointed Money and Mental Health Policy Institute vice chair Richard Lloyd to lead an independent review into its complaints handling process. The former Which? executive director has been charged with producing a report into FOS’ practices after a Channel 4 documentary earlier this year suggested a number of failures at […]
Aberdeen Standard Investments has voted against multi-million pound payouts for senior executives at housebuilder Persimmon. Persimmon held its annual general meeting today. There was a huge outcry at the end last year when it emerged the chief executive, chief financial officer and managing director of Persimmon were in line for huge pay packets as a […]
Consideration of non-pensions related tax-advantaged investment is becoming more necessary This week I want to take a look at where things stand in relation to pensions and planning using tax-advantaged investments following the Spring Statement. With the increasing impact of the lifetime and annual allowances, consideration of non-pensions-related tax-advantaged investments is becoming ever more necessary […]