There are fewer super funds, and associations that represent them, than ever before. But multiple layers of industry representation working at cross-purposes means that true unity has remained elusive, according to the Financial Services Council.
The world’s largest sovereign wealth fund just made its largest return ever. But the probability of extreme market events has “arguably risen”, and it’s carrying out stress tests for a more uncertain future.
Frontier going hard-line on fees
(pictured: Damian Moloney)
Frontier Advisors is turning up the heat in the increasingly widespread debate about funds management fees, with its chief executive putting pen to paper for a thought-leadership piece which updates previous work by the asset consultancy.
The latest paper, “Progressing a New Deal on Fees: Ideas for Institutional Investors” aims to: “Reiterate the most challenging and significant of the current fee issues, propose a number of approaches that might assist the institutional investor in getting value for its fee budget and also highlight some recent positive outcomes on investment management fees.”
Perhaps the most contentious recommendation – although not new to Frontier clients – is that the standard ad valorem fees should be resisted at every opportunity in favour of a simple CPI/AWOTE- adjusted fee off a flat or fixed-dollar base.
The paper adds that: “Performance fee structures with no minimum level of performance, or the cash rate, generally have no place in today’s investment marketplace”
Scale discounts need to be greater, reflecting the marginal cost to the fund manager of the additional funds being managed.
Managers with “favourable and acceptable fee structures” should be rewarded with future fund flows and long-term mandates”, Moloney says.
“Investment management costs are a key drag on the net return and therefore should be continuously, objectively and specifically assessed for value.”
