PA ANALYSIS: Could Numis’s reporting attack have big consequences?

The recent brouhaha between UK fund giant Schroders and stockbroker-analysts Numis over fund performance reporting may have welcome consequences.

PA ANALYSIS: Could Numis’s reporting attack have big consequences?


The debate could lead to the creation of standardised measures for the proportion of fund groups’ funds that are outperforming versus those that are lagging.

Clearly such measures would be a useful tool for wealth managers when performing due diligence on a provider.

But could there also be more far-reaching consequences?

The issue came after Schroders on 2 March published results that included a claim 74% of its assets had outperformed over three years and 85% had beat the market over five years.

In stepped Numis analyst David McCann, who was quoted in the FT saying the figures represented “disingenuous reporting of alpha”.

He said Schroders had told the firm some of the figures it used to arrive at the figure had not included the fees investors paid – the figures were ‘gross’ not ‘net’.

Numis also took exception to the fact Schroders had placed a footnote, stating that not all of its funds were included in the figures, much later in the results document.

This triggered a fierce public counter-attack from Schroders whose chief executive, Peter Harrison, told the FT the firm was trying to get reporting right and “[took] offence at the inference we are trying to do something underhand”.

Schroders says its use of both gross and net figures reflects market standards, and its footnote on performance (which runs to 155 words) was clear.

The row ended with a full retraction and apology from Numis, which later said it regretted using the word “disingenuous” and that Schroders’ five-year performance presentation was, in fact, appropriate.

Some have suggested the issue may be addressed in the FCA’s forthcoming Market Study of Asset Management. It is unlikely to become a major consumer concern, though.

The data seen by consumers is based on changes in funds’ published unit prices for a particular share class, and those changes are by definition net of all fees.

However, the row does go to the very heart of the active/passive debate.

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