“Sure, good active is really highly valued, but it is really hard to find. The industry has matured a lot to a focus on cost, goals and discipline which has meant lower fees and more indexing.”
Financial services is facing the challenge of catering for a major demographic shift with a wall of baby boomers entering retirement and the pension phase. Echoing some other asset management chiefs, James wants to promote Vanguard on its “thought leadership around the retirement space, at an investor and institutional level”.
This expands to product with clients moving from accumulation to drawdown and the complexity of manging risk as well as growth and income. Still, he stresses, Vanguard is not a fund proliferation group. “Every product we put to market goes through a detailed governance process because that is our brand and reputation,” he says.
“We do not just put something out there because a client wants something; we really think about launching things that are going to be there forever. Therefore we tend to favour the broad diversified building blocks, though the big change is now introducing active as well in a low-cost market.”
Ten years ago, with the UK ETF market in its infancy, there was much conjecture on its rise as a considerable threat to the future of passive open-ended funds. However, this has not been the case, and as a provider of both structures, Vanguard understandably sees a place for both in the years ahead.
“It is just purely an investor preference – do you want to buy that via the exchange or in a fund form?” says James. “Some people like to use a mobile phone, while others would prefer to have a landline.
“For us, an ETF could be seen in that context. There certainly are ETF products that are complex, high cost and potentially have varying degrees of success, but that’s the same case with active funds?
“For us, our ETF evolution has been that wealth managers have a different choice, and with an ETF having an intra-day pricing mechanism and funds priced at the end of the day. Maybe some of the noise around ETFs is coming from high-cost, underperforming active segments?”
