“I expect the curve to steepen all the way down in the next few years as we see the regulatory pressure coming to bear from the FCA. When you introduce transparency into the market, the customer tends to win, which would support a steepening of that chart,” he commented.
“What we need is better accountability. Obviously, if fund managers are performing extremely well and making money for their unit holders, then no one will be complaining about fees. Instead, we’re seeing the herding of pricing with far too little fund outperformance.”
If lower fees are the route to changing that reality, Ferguson says he is on board, but he thinks the unrelenting regulatory pressure and lacklustre performance of products on the market will change the shape of the industry dramatically.
“If maintaining a pressure on fees is the key to unlocking better performances, we may very well end up in a world where passives become the more dominant force in the world with high-performing, true alpha funds at the high-end of the market. The issue is that those funds in the middle ground are going to continue to get squeezed out, some of which are charging significant active fees for a mediocre or dire performance.”
