Showing posts with label Investment Management. Show all posts
Showing posts with label Investment Management. Show all posts

21 Aug 2023

Acquisitions can easily misfire - especially in a People business like Fund Management

Goldman Sachs explores investment adviser sale in retreat from mass market

Careful due diligence can mitigate risks associated with Acquisitions - Temple Associates has 50+ years hands-on experience in the financial markets, in different cultures.

12 Aug 2020

Outsourced CIO (OCIO) - solution of fad?

Basically the OCIO (or 'fiduciary') approach to manage institutional portfolios is a move back to what once was popular as the 'balanced' approach to portfolio management. The provider is given more or less discretionary authority though tailored constraints transfer more or less responsibility back to the client. The more constraints are included in the mandate the less responsibility for the ultimate performance can be pinned on the OCIO and in the end the whole thing ends up in a messy outcome where each side blames the other when results are sub-par.
Reading this statement from the quoted report one has to wonder whether or not those responsible for the management of the portfolios are really qualified for their tasks.

The Pandemic Is Spurring OCIO Growth. Transparency Will Follow 

"Crises cause many institutional investors to realize that they are not comfortable or properly structured to effectively navigate a volatile, complex, fast-moving capital markets environment under the traditional consulting relationship, much less fully independently."

            

27 Jul 2020

ESG creates quagmire for Fund Managers

And business in general. The demands from lobbies and interest groups will expand and no action by managers and businesses will be enough to satisfy them. Once pandora's box is opened issues that really should be settled in the realm of politics will lead to never-ending complications for what should really be the priority for business and investment - obtaining profits or a satisfactory performance for savers.
(27-July-2020)
Boohoo supply chain allegations reveal challenges facing ESG investors

21 Oct 2019

Fund Management Consolidation - a caveat

Anath Capital acquires Stratton Street  and will integrate the credit fund manager's $500 Mio AuM with its Garraway Capital subsidiary to bring combined AuM to $ 1 Bio.
While consolidation in the Asset Management space continues it will not end in a completely oligopolistic landscape. The bigger the dominant firms become the less able they will be to differentiate their products or achieve outperformance. This will always leave room for up-and-coming managers - apart from the human desire to run their own business rather than being stuck in huge bureaucracies.

26 Apr 2019

Asset Managers strive to cut Banks out of Forex Dealing

Not sure that FX trading is such a significant drag on performance. Maybe fund managers should just do less frantic in- and out trading. And trying to find counter parties directly at the right time and right size is not going to offer significant rewards. Who wants to take the other side of a 1 billion trade when one knows that the other side HAS to trade?
Asset managers strive to cut out banks from forex dealing

4 Dec 2018

Balyasny said to cut 125 People

It is quite amazing that a Hedge Fund - or any Investment Manager - with an AuM just under $12 billion can have a cast of hundreds, more than six hundred staff in Balyasny's case. So it is no wonder that such a large cut in staffing numbers became inevitable.
Hopefully most Firms have a tighter control over their headcount - a strategy of hire and fire is not conducive to a good working environment and investment clients are less than happy if they see frequent staff changes.
Balyasny Cuts 125 People as Hedge Fund Bleeds Assets

29 Nov 2017

Active ETF's - just a type of Closed-end fund?

ETF's have not been really tested in a major market downturn or panic. 2008-09 does not count as amounts involved were still quite small, and focused on simple structures linked to major indices. The next 'Big One' will be different. As I see it, active ETF's are pretty similar to Investment Trusts (UK) or Closed-end Funds (USA). They are just trying to keep NAV and Market Prices as close as possible. But will they succeed? Only time will tell. I for my part will be happy to capitalize on any price distortions - and distortions there will be (or the 'Authorities' will shut the market).

7 Oct 2017

Zero Fund Management Fees?

Maybe at first sight it appears reasonable to wave any fund management fee if the performance does not match the agreed benchmark. And why not ask the fund manager to make a penalty payment as well? But to be serious, any business that agrees to a zero fee would not be viable in the long run. Better to agree fees to be calculated on a (three year?) rolling basis and set the fee in a narrow zone, for example basic 1% and a band of +/- 0.5% to adjust for over/under performance?
Bloomberg

8 Sept 2017

Investment Management: No limits to Size?

Talk of (inevitable?) concentration in the Investment Management universe must lead to the obvious question: is it really inevitable as many consultants and industry bigwigs are saying or is there a natural limit to ever-expanding amount of aum among the industry giants such as Vanguard, Blackrock or JP Morgan?
There may well be the result of at best matching the investment benchmarks (minus fees, costs) as the sheer size of portfolios makes any meaningful divergence from the benchmark more and more impractical. So even active management will be not much different from passive management the bigger a provider becomes.
Product differentiation may provide a (temporary)?) solution as the myriad of strategies can again try to be nimble small fish in a big pond. So effectively big investment houses become a congregation of investment boutiques under the same roof - be they separate subsidiaries (as at Natixis for example) or just different teams under the same umbrella.
Which leads to the next conclusion: if boutiques are the way to at least try to make active investment management work who is to say that free-standing boutiques or even mid-sized firms are necessarily at a disadvantage? Everybody knows where the big pools or money are and digital distribution channels will keep the costs garnering assets under control.
Largest US pension fund CalPERS in talks with BlackRock to outsource buyout business, source says

1 Jun 2017

Is big better in Money Management Biz?

Bigger does not necessarily mean better. Big fund managers did something right otherwise they would not be big. But that could also be their undoing. Once you manage billions you are going to find it very difficult to achieve any out performance. That will mean that smaller firms will find room to grow.
Big money managers are squeezing smaller ones at worst possible time - Business Insider

17 May 2017

Vanguard's new UK Online Offering

Afraid this is the way things will go - I  remember the time (more than 45 years ago) when Robeco's international flagship fund charged 0.36%. So maybe that is where the Mutual/Investment Fund Industry is headed to. Who still remembers Bernie Cornfeld's ill-fated IOS? Those were the baby years of investing funds...and the sums have become enormous since the late 1960s. But looking at the way Fiduciaries like Aberdeen Asset Management and Standard Life spread the investor's money around like confetti it does not give the impression that the Industry is ready to face the new reality.
Vanguard launches online investment service in UK

4 May 2017

Risk Parity: Just another name for Portfolio Insurance?

Risk Parity - like Smart Beta or Factor Investing - is old wine in new bottles. A Bull market always needs a rationale to justify the irrational, Greed has overcome Fear. In reality all is backed by a tide of easy money.
Pondering The Real Perils Of Risk Parity Portfolios | Zero Hedge

13 Apr 2017

Compensation: Excessive focus on individual performance dangerous

Compensation based on share price development? This is contrary to all sensible pay schemes and one of the main contributing factors to excessive executive pay. Maybe this works in the confines of a small investment boutique but even there it is not clear what the scheme could do to improve the performance produced for investment clients.
Excessive focus on individual performance is inherently dangerous, says Barry Olliff | City A.M.

20 Mar 2017

Texas Teachers - new Fee Model for Hedge Funds

Will 1+30 become the new standard? Relating the higher performance fee to some kind of hurdle rate is the problem. Which rate is suitable? And if is is some money market rate this is particularly problematic. At present rates are so low that beating them would not be that onerous. And if rates are high, 6, 7 or 8 pct, then the hurdle is difficult to overcome.

18 Mar 2017

AllianceBernstein tries Performance Fees

The basic fee of 0.05% in case the funds underperform are quite meagre, will this approach be sustainable? The fee income has to pay for a lot of expenses. The comp for CEO Peter Kraus alone ($6.35 Mio according to Yahoo) would need a fund volume of 12.7 Billion (!!) to pay for, and that leaves NOTHING for any other costs!
AllianceBernstein Fires the Latest Shot in the Fee Wars (Barron's, PayWall)

29 Nov 2016

FCA Interim Report on Fund Management

It is always reassuring that the cast of thousands employed in the recently-established regulatory silos are put to good use. Even if it is mostly confined to produce volumes of paper that unfortunates in the businesses that they are regulating are forced to plough through.

Does the Fund Management Industry need more 'oversight'? Maybe, but to a certain extent any imperfections are also the result of misguided legislation introduced by a succession of governments (and increasingly so by a EU and its assorted bureaucracies).

But what benefit will it bring to raise the fiduciary bar from a general obligation "to treat customers fairly" to a new requirement "to act in the best interests of investors"? No doubt that legions of (expensive) lawyers find this picking of words will go a long way to pay for their kids' school fees.

Even more expensive (for the investors, for as they will ultimately have to pick up the tab for this new boondoggle) would be the introduction of an "Independence Governance Board".  It will be most welcome to myriad retired professionals that will be employed to produce annual reports of the issues they have raised and management's response.

How the introduction of an all-inclusive charge could work in practice does not seem to be of major concern to the paper-pushers at the FCA. Trading in securities is still not free, even in the age of online dealing and wafer-thin commissions.

Professional/Institutional Investors are already more than able to analyse the performance and cost of investment propositions.

The FCA report is more relevant for the retail investor who may find it difficult to pick the right investment fund when there are many more funds than equities to choose from. So investors tend to rely on intermediaries - Private Bankers and IFA mostly - that do the selecting and monitoring for them. Maybe more transparency would be needed in that space? How many Private Banks publish their performance and fee schedules on a regular basis?

Asset Management Market Study, Interim Report, FCA

29 May 2016

End of Hedge Funds?

Gloom and Doom may work for Marc Faber but it should not overshadow rational analysis of the Hedge Fund Industry.

24 May 2016

DIY Pensions -like DIY Brain Surgery

The idea that the average person should be wholly/predominately responsible to save for his/her retirement is laughable. It may appeal to doctrinaire free market advocates and it certainly appeals to the providers of the many 'products' that are supposed to provide for a care-free retirement.
But much better for the state to provide a sufficient pension. Longevity and investment risks are truly shared, between all citizens and all generations. Costs are very low - no pass the parcel investment games, no expensive admin (everyone gets the same pension, higher rate taxpayers give back more than those in a low tax bracket or not liable to any income tax). This is to some extent akin to the currently debated 'Guaranteed basic income', but only applied to those already retired.

Anyone who has tried to manage his own investment portfolio will understand how difficult investing is. Even so-called professionals time and again mess up, highly acclaimed 'Masters of the Universe' in the Hedge Fund industry often produce lamentable investment returns. So pushing the masses into the investment game means they are supposed to do the equivalent of Brain Surgery on themselves.

By all means encourage people to save, but this part of their retirement provision should not benefit from overly generous tax benefits (that mostly flow to those already enjoying high incomes) and also be free from all other regulatory and bureaucratic restrictions. These additional nest-eggs can help to provide a more comfortable old age than the universal state pension will be able to provide.

48% of Americans saving for retirement are pretty sure they have no idea what they are doing (Business Insider)

Report on the Economic Well-Being of U.S. Households in 2015
(Federal Reserve)

8 Dec 2015

ABP to introduce 'Climate Budgets'

Does it really make sense to introduce 'Carbon Budgets' as a constraint on the mandates for Asset Managers? First of all, the calculation of carbon usage for all investment options is expensive and it is also more than likely to be imprecise or liable to be gamed. And why not a Carbon budget for fixed income investments (even more complicated and expensive, how much Carbon usage to you allocate to a bond?), and before we forget, I hope there will be Carbon budget for 'Private' Equity and Hedge Funds? And last not least, don't forget the HFT firms. And what about Bank lending?
Nevermind that there is a simple solution at hand (Tax Carbon if you are hell-bent on limiting its use). Why not act according to the principle, what is good for the Consultants MUST be good for the Consumer (here in the shape of hapless end investors in Mutual and Pension Funds, Private Banks and Insurance Companies).
And while we are on the subject of Climate Hysteria, has any political or business 'leder' ever received a democratic mandate for imposing ever-more 'green' taxes, costs and regulations on the citizen/consumer/investor anywhere in the world?

18 Nov 2015

Hard to believe: Competition Inquiry into Fund Management

Bureaucrats are hard-pressed to find enough to occupy the enormous number of people working at the UK's regulatory body, the FCA. The irony is that the roughly 4000 employees themselves put a large burden on the industry and by extension on the British (and international) savers who ultimately pay for the costs of this neo-totalitarian construct.
Sloppy supervision led to the so-called abuses in the financial sector (Forex, Libor, 'mis-selling' of payment protection) and even more sloppy prosecution led to the imposition of arbitrary fines that bear no relation to the 'crimes' committed. In any proper court of justice there has to be concrete proof that harm was done but these enquiries are nothing else than vindictive persecution of an unpopular and quite often hated minority.
And the bureaucrats take their time. The final report is not expected to be published before early 2017 (who wants to open a book on that?).
There may be problems in the UK asset management industry but only a fool (and a regulator with time and money on his hands) would say that there is not enough competition. Any distortions are more likely to be the outcome of ill-considered tinkering by politicians (and I am sure Chancellor Osborne is busily working on some more schemes that will aggravate an already non-sensical legal and tax framework).
FCA launches competition study of UK asset management industry (IPE)