Potter rage at ‘brainwashed’ industry after Morningstar downgrade

BMO GAM’s Gary Potter has hit back at the “brainwashed” fund industry’s attitude to costs after two of his F&C multi-manager funds were downgraded by Morningstar.

Potter rage at ‘brainwashed’ industry after Morningstar downgrade

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Potter, co-head of the F&C multi-manager fund range, said he was “fuming” to hear both the F&C MM Navigator Progressive and Boutique funds were bumped from a bronze to neutral ranking by Morningstar this week, a decision that appeared to be based solely on the funds’ charges.

In a note issued on Wednesday, analyst Randal Goldsmith said the high fund charges would be a “drag on future outperformance” despite them having high regard for the funds’ team.

Potter has since hit back at the decision, claiming it reflects a growing and “disproportionate” focus on costs in the fund industry.

“The cost tail is wagging the investment dog and I feel particularly strongly on this because ultimately people may be buying what they see as a cheap product without any consideration for the client outcome,” he said.

“To be downgraded because of the level of fees worries me.

“If we had underperformed we’d deserve what we got, and I don’t think we deserved it at all.”

He added: “I was absolutely fuming when I heard but I have calmed down now and we have to be mature about it and carry on doing what we are doing.”

While multi-manager funds have long been known to charge higher fees, Potter said the F&C funds find the best managers of tomorrow and searched for “genuine” investments that would add value.

Judging the quality of an investment is far more important than how much it costs, he added.

“If I was 65th percentile because the fees were a real drag and we were just picking poor managers and tracking the index then I would understand. But we’re not,” Potter said.

 

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