Fund selector views on fees, mergers & acquisition
The fund selector community has again raised the issue of fees paid for poor performance. They also debate the challenge of takeover.
Taking risk measures
Name: Enrico Bonanno
Title: Portfolio manager
Company: Banca Euromobiliare
How are investors reacting to the ongoing uncertainty in financial markets?
In such an uncertain economic and political context, customers tend to reduce their exposure to risky markets, even in fixed income.
Flexible fixed income products with a bias towards the junk bond market are still the most favourite asset class. Keeping risk under control is extremely difficult and more complex than few years ago. Managing a government bond portfolio is really more than a simple duration risk management.
Companies that are able to implement more advanced risk measures are certainly the ones to be preferred in such an environment. Our customers are mainly focused in relative-value products. Nevertheless, we do have some exposure to total return-style products, nothing offshore, especially focused in the fixed income universe.
Name: Andrea Panzieri
Do you see increasing demand for multi-asset solutions among your client base?
If you look at the official figures from the Danish funds association, you would see immediately that multi-asset, or what we call balanced products, where you primarily mix equities and bonds, but perhaps other asset classes, has had tremendous growth.
A lot of the top-line growth has been a ‘zero sum’ game: it has been assets that have been there all along, but in another part of the value chain. For various reasons they are emerging and becoming visible in the mutual fund statistics.
[In terms of our owners], it’s not entirely financially rational to have a whole number of SME banks each with their own asset allocation and strategy teams, doing multi-asset funds, when they could externalise it and harbour some synergies through that.
Rewards only after profits
Name: David Lashbrook
Title: Senior analyst
Company: Momentum Global Investment Management
How do you view fund liquidity terms and crystallising of fees?
We do not like to see structures where managers can crystallise fees on illiquid assets because they are winning at half time. They should only be rewarded when they crystallise the profit. You do not want a manager to have more liquid terms than you as an investor. If a manager provides you with annual liquidity but crystallises fees quarterly, either he is being greedy, or the fund has inappropriate liquidity terms.
The key year for all this was 2008, and we obtain funds’ financial statements and found for the P&L you saw losses, but the investment manager [took] a performance fee. So the fund lost money but the investment manager took money in the form of performance fees out of it. They crystallised fees in mid-2008. On our Focused Opportunities Fund, we collect the performance fee every two years.