To remain attractive to their shareholders there is pressure on listed firms – Schroders, Aberdeen, Henderson, Standard Life, Jupiter and others – to prove they are not going to be overwhelmed by threats from the passive industry.
Critics have long suggested active funds are too expensive and unreliable, and that the soundest way for clients to invest is simply to select ultra-cheap passive funds and hope markets rise over the long term.
The Schroders-Numis episode reflects how significant the threat to active managers from passive is, and also how important it is for managers to show that they can add value in return for their fees.
There is an argument to be made for the use of gross figures in performance comparisons, since the comparisons are with market index results – which are themselves theoretical and unachievable as costs are inevitable in investing.
But many will argue that, since one of the core purposes of active investment management is to aim to outperform the market, actual delivery net of fees must be reflected.
Others would say that since different grades of investors pay various levels of fee – with institutional investors often paying considerably less than retail clients – the use of gross return figures is also justified as an overall indication relevant to all.
The issue has now drawn fresh attention after Numis last week followed up with a research report assessing the reporting of all UK-listed asset managers.
