The report calls for a standard methodology, including a requirement to state what proportion of assets under management have contributed to a calculation and that only net figures be used.
“Fees are an essential component of alpha in our view,” Numis says.
The report lays bare the variations between asset managers in reporting group performance, with myriad measures of alpha, different usage of gross vs net returns and other disparities shown.
Numis suggests many of the groups may be including terminated funds in their calculations, while some are using “representative” portfolios instead of “actual” client returns to arrive at results.
It remains to be seen whether the issue will be addressed in the FCA Market Study, or perhaps even picked up by bodies such as the Financial Reporting Council.
Industry insiders yesterday told Portfolio Adviser there was support within asset management for such reforms at an industry-wide level, to clarify things for investors.
If standardised performance measures were introduced, firms such as Numis would undoubtedly then wheel out asset manager performance rankings in short order.
No self-respecting asset manager would want to find itself languishing at the bottom of that kind of list.
One consequence might therefore be a greater willingness by asset managers to shut down failing funds, rather than leaving them open to reap ongoing revenues from any apathetic clients.
It has long been argued the industry needs to slim down and close the hundreds (nay, thousands) of lacklustre funds that drag down the industry’s average performance calculations.
Could standardised stockmarket performance reporting be the final catalyst to make this happen?
