But, both stories are likely to weigh on UK asset management distribution arms like the ghosts of Christmas weigh on the title character in Charles Dickens’ A Christmas Carol.
It may seem a rather clumsy metaphor, but stick with me. America’s largest pension fund, the California Public Employees’ Retirement System is providing a glimpse of a possible future for the UK asset management industry, wherein fees are becoming ever more important.
As Bloomberg reported on Monday, according to Chief Investment Officer Ted Eliopoulos, the reduction from 212 managers to 100 over five years is part of a broader plan by the pension fund to reduce costs.
“Calpers is taking the next step in what we see as our multi-year effort to reduce risk, cost and complexity in our portfolio so that we can deliver the investment returns that are necessary to meet our obligations,” Bloomberg reported Eliopoulos saying.
Granted, as many as 70 of those managers to be cut are private equity players and most UK-focused retail asset managers are unlikely to be vying for Calpers’ business, but the point remains worth taking: not only are costs becoming increasingly important, but also, just being lower cost is no longer enough.
Indeed, a similar point was made by Simon Hillenbrand, director of UK retail at Henderson Global Investors. Speaking to Portfolio Adviser last month, he said that after the introduction of the Retail Distribution Review (or to extend this metaphor, the ghost of Christmas past) things have already become tougher.
“Post RDR competition is a lot fiercer, passives are growing all the time, we know people are using them more willingly, so the portion of portfolios we are making up as active managers is shrinking and people are demanding more for their money. You can’t just sit and coast in the middle lane. It is about sticking your flag in the ground and saying this is what you can expect from us,” he said.
