very highly remunerated fund management industry

SallyG

Robert Peston wrote
"There's also a more insidious factor, pointed out to me yesterday by a fund manager who looks after vast amounts of other people's wonga (it might be your wonga, if you're saving for a pension).
The point is that the earnings of people like him, who manage our savings, are even less transparent than those of company executives.
So his boss, he says, has a pretty big personal incentive not to make too big a fuss about how much and how corporate directors are paid, because someone might at some point start a campaign for greater disclosure of pay practices in the very highly remunerated fund management industry."
Time for another campaign Martin?

atush

Lets get the other one done first?

Moby

SallyG wrote: »

Robert Peston wrote
"There's also a more insidious factor, pointed out to me yesterday by a fund manager who looks after vast amounts of other people's wonga (it might be your wonga, if you're saving for a pension).
The point is that the earnings of people like him, who manage our savings, are even less transparent than those of company executives.
So his boss, he says, has a pretty big personal incentive not to make too big a fuss about how much and how corporate directors are paid, because someone might at some point start a campaign for greater disclosure of pay practices in the very highly remunerated fund management industry."
Time for another campaign Martin?

Totally right....total transparency is the only way to fairness!

Lokolo

I disagree entirely. If we start doing this, then why not include IT systems and IT staff? Why not include rent of the buildings? And maintenance staff. The list will end up huge and just add additional costs in getting all this information.

SallyG

http://www.ftadviser.com/2012/01/12/opinion/tony-hazell/tony-hazell-fees-revelations-makes-for-murky-new-year-uXCdM327ma3uqLwJ11SGuO/article.html

"Money Management’s report, which will be published in February, was highlighted on Financial Adviser’s sister website, FTAdviser.com.
The coruscating effect of charges is now the big issue which the investment industry must not be allowed to duck.
Many of those running fund management companies appear to be in denial about the challenges facing them."

SallyG

http://www.guardian.co.uk/business/2011/dec/17/treasury-warned-over-traders-fees

"Highly paid City traders are depriving pensioners and savers of thousands of pounds through high management fees that are often hidden, according to leaked advice provided by consultants to the Treasury. The charges are spreading and are so steep that savers may find they get less back in retirement than they invested in savings accounts and pensions over their lifetimes.

If the size of the charges were to become widely known, the UK's "fragile savings culture may be permanently damaged", according to the warning presented to the Treasury last month."

"The average equity fund manager makes explicit that they are charging about 1.5% a year of the sum invested for their services, but additional hidden expenses average 0.3% a year and trading costs cut a further 1.4% off an investment. And the situation is getting worse, according to the analysis, which found that charges had increased by 9% in the last decade. The presentation added: "If the trend of diminishing returns and increasing costs continues we could soon expect negative returns on average." "

What do IFAs know about these "high management fees" and how are they protecting their clients against them?

atush

Sally, you would apprear to have an axe to grind on this? The new system about charges and transparency will help to achieve your aims, but I don't see the need for a witch hunt either.

Lokolo

SallyG wrote: »

http://www.guardian.co.uk/business/2011/dec/17/treasury-warned-over-traders-fees

"Highly paid City traders are depriving pensioners and savers of thousands of pounds through high management fees that are often hidden, according to leaked advice provided by consultants to the Treasury. The charges are spreading and are so steep that savers may find they get less back in retirement than they invested in savings accounts and pensions over their lifetimes.

If the size of the charges were to become widely known, the UK's "fragile savings culture may be permanently damaged", according to the warning presented to the Treasury last month."

"The average equity fund manager makes explicit that they are charging about 1.5% a year of the sum invested for their services, but additional hidden expenses average 0.3% a year and trading costs cut a further 1.4% off an investment. And the situation is getting worse, according to the analysis, which found that charges had increased by 9% in the last decade. The presentation added: "If the trend of diminishing returns and increasing costs continues we could soon expect negative returns on average." "

What do IFAs know about these "high management fees" and how are they protecting their clients against them?

All of these charges are shown in the performance of the fund. If the investor doesn't like how it is performing after fees, they are free to move their money elsewhere.

Gadgetmind is a regular on here who also does not like high fees and is very much a supporter of index funds. These funds are available to the public through different methods.

There isn't really an excuse to "blame it on the fees" when, although not explicit, can have their impact be seen in performance.

le_loup

I don't think it hurts to rail against high fees. We pay around 3 times as much as US mutual fund investors, so if they can do it, why can't we?
True, one can buy index funds but that will only return average amounts. You may well say that we therefor get benefit from paying a higher charge. True but why don't we get even more benefit by paying less.
For managed funds, there is no real competition ... well there is but it runs as a cartel. Look at how all the majors quietly increased their AMCs buy around 0.25% over the last few years. Bit like ALL the energy companies suddenly, in the same week, discovering that they can charge less!
No, I think it is worth nagging and nagging about this subject, otherwise we will get into the AMC PLUS PERFORMANCE FEE syndrome in no time.
Keep up the good work SallyG.

gadgetmind

le_loup wrote: »

True, one can buy index funds but that will only return average amounts.

Which is great as it means that they beat the vast majority of actively managed funds over longer time periods.

dunstonh

We pay around 3 times as much as US mutual fund investors, so if they can do it, why can't we?

300 million greater population maybe? We pay more than the US for virtually everything.

Also note that taxation in the US makes it damned hard for a managed fund to provide value. You are better off going tracker in the US. That taxation issue does not apply to the UK.

Look at how all the majors quietly increased their AMCs buy around 0.25% over the last few years.

Someone has to pay for the platforms that some think they get for free. This is where the RDR/platform review will show transparency. When you look at the history of platforms and the deals put in place, you will see that the platform cut is often the biggest chunk of the TER. You can see why the fund houses needed to put their charges up as they were getting so little. Some as little as 0.1% of the TER. The move to unbundled explicit charging should improve things in the long term (but not the short as there are too many platforms and it takes them around £3-4 billion to become profitable).