Neither the rise of outcome-based investing or the growing focus on proving one’s true alpha generating capability are new, but both trends stem from the growing recognition that the client of the future is likely to be more interested in concrete results than beating a benchmark.
It is against this backdrop that Portfolio Adviser also noted Monday morning’s news that Woodford Investment Management will begin to absorb the cost of research used by its CF Woodford Equity Income Fund.
As WIM CEO, Craig Newman explained it: “Ultimately the investment performance, net of all costs, is what investors are interested in,” he continued. “But we also want our investors to be able to see the total costs taken from the fund – how much we have to pay to buy and sell stocks within the portfolio, and how much we have to pay in subsequent taxes, for example. Research costs are a function of our role and we believe it is only right that Woodford, not our investors, pay for it. Only by knowing all the costs will investors be able to make a considered judgment on whether they are getting value from their fund manager or not.”
The debate over who should pay for research is a long standing one within financial services and it is one that the regulators are looking into. But, it will be interesting to see how many other managers follow Woodford’s lead. Granted it accounts for only 0.02% of the net asset value of the fund per year, but the sentiment chimes perfectly with the mood of the day and is unlikely to be the last salvo fired in the battle for transparency.
There will be further skirmishes and missteps along the way, but in the end there is little doubt that transparency will win out, the trick now for those financial services firms that want to continue to gather clients is ensuring one stays on the winning side.
