The world of asset management may be constantly evolving but can the same be said for the fundamental reasons private investors choose to entrust their money to the sector in the first place? Artemis’s head of distribution Greg Jones is not convinced, pointing back to when he started his career in 1985 as a portfolio manager for a small broker that shortly became part of Sedgwick Group.
“I was running what the company called its ‘unit trust portfolio management service’ and we had three models,” he says. “These were based on what we thought our clients’ requirements were – simply put, ‘income, growth or both’ – and, if you really dig down to the root of most clients’ demands, isn’t that what they still want? In the years since, however, the industry has done a lot to make things more confusing.
“If you were to ask the end-client what the S&P 500 is, say, or the Spider or even the FTSE All-Share, a lot of them would not actually know – because they do not reference such things. What they really want to know is, ‘If I give you £10,000, is there a chance it will be worth more than that in five or 10 years’ or whatever it may be. In a similar vein, I would argue the end-client also thinks of time and risk in a different way.
“Our world has become ever more obsessed with short-termism – whether that is measuring corporate results on a quarterly basis or judging investment performance over one and three years. Again, when I started out, clients were told risk assets should be held for the medium to long term – so five years minimum; do not borrow money to invest; and do not invest if you cannot afford to lose capital.
“So life has become more complicated for the end-investor – as, of course, it has for the industry, given the regulation introduced over the same period. If you think about it in the simplest terms, though, what is our job? It is to take what our clients entrust to us and then, all being well, return more than that five, 10, 15 years or more down the road. Look at all the documentation around the industry, though, and you would not know that.”
To read the rest of this article visit the October edition of Portfolio Adviser Magazine