One of the biggest problems generated by the funds industry is that it is constantly creating soluti...
One of the biggest problems generated by the funds industry is that it is constantly creating solutions to problems that don't exist.
Fund groups all have products that can be characterised by one or more of the following: poor performance, lack of critical mass, or a mandate that no one really wants. Once the latest hot story has cooled, so too does the ardour of the investor and all too often the commitment of the group to the fund.
The resulting pile of portfolios is justified by groups as providing them with a comprehensive range of funds for clients, holding out the promise that what is doing poorly today could well be the wonder product of the next five years.
As such, it is a welcome development to see Schroders taking radical action to tidy up its range, closing down and rationalising a bewildering array of UK, US, European and Japanese style-based portfolios.
Fund managers often say the best way to get returns is to cut losses and run winners and it is refreshing to see an investment group applying that logic to its own business.
The truth is that Schroders, like many other groups, launched a vast range of portfolios investors did not want or need. The emphasis on style blend and diversifying exposure to markets via more than one fund has probably gone too far. There are plenty of multi-managers who now argue the best risk/reward blend of managers is two per market.
For the very top end of the intermediary market there are already more than enough funds and managers of a high quality that can be blended without groups launching more. For the rest of the market there seems to be little point in buying a value and a growth fund when you just buy one that does both, and charges no more for the privilege of having a manager who tilts between the two. Cazenove's Tim Russell is popular with intermediaries for that very reason.
It is a case of two cheers for Schroders rather than three. After all it has made radical change something of a habit in the last few years. Ever since the departure of Jim Cox there has been a steady turnover of managers on its key UK funds and now that it has ditched style funds its commitment is to core and focus.
The problem is that this is all the rage with other groups at the moment.
Radical and fundamental change does not occur until it has translated into success. If it fails it is dismissed as fashion. Good luck to Schroders and its investors, but its recent change is no guarantee of future success.
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