© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Last updated: December 9, 2013 5:27 pm
Regulation and reforms on fees are putting greater pressure on active fund management groups to outperform rival passive funds, which track the wider markets.
Since the financial crisis in 2007, passive funds have trebled in size in Europe, according to data provider Morningstar. Clients have switched to passive funds because they charge lower fees and often outperform their active rivals.
Although Jupiter, which specialises in European and UK equities for retail investors, has been one of the top performing active groups, the challenge to outperform the passive funds and the wider market has become ever greater.
This is because regulators have brought in reforms in countries such as the UK, the Netherlands and Denmark to make fees charged by investment groups more transparent for clients.
Despite these pressures, Mr Bonham Carter insists active managers can still do better than passive groups. “The best active managers can outperform passive funds. You have to have conviction and a clear strategy, but at Jupiter we have shown active management can offer better returns than passive after fees.”
Certainly, the performance of Jupiter’s top fund managers has been impressive.
Patrick Connolly, a financial adviser at Chase de Vere, says: “Jupiter has a strong track record. I think a lot of that has to do with Mr Bonham Carter’s decision to give his fund managers plenty of flexibility and freedom. They have been allowed to pick the stocks and bonds they want without restraint and that has helped performance.”
For example, Alexander Darwell, who heads Jupiter’s flagship European equity fund, has outperformed the sector average by 65.8 percentage points in the past five years. Ariel Bezalel, who runs the group’s flagship bond fund, has also outperformed by 46.3 percentage points.
Significantly, Mr Bonham Carter’s successor will be Maarten Slendebroek, Jupiter’s distribution and strategy director, who is highly experienced in retail asset management. He joined the group in September 2012 from BlackRock, where he was head of the international retail business and before that head of BlackRock Solutions.
There is a changing of the guard in the asset management industry. The most recent senior figure to declare his intention to step aside from the sentry box is Edward Bonham Carter, chief executive of Jupiter Fund Management. He follows John Fraser at UBS, Graeme Dell at Ashmore and Neil Woodford at Invesco, writes Alison Smith.
Mr Slendebroek’s main task will be to develop a strategy to retain business in the retail sector as profit margins have come under growing pressure from transparency and regulatory reforms.
Added to the regulatory hurdles is an economic backdrop that has made it even harder for asset managers to produce strong returns as bond yields remain at historic lows and the industrialised economies continue to stutter with sluggish and often patchy growth.
As returns become tougher to achieve, consolidation is likely to be a feature of the industry. Aberdeen Asset Management’s swoop on Scottish Widows Investment Partnership last month was a sign of this trend.
Aberdeen, the biggest independent investment group in Europe with £336bn under management, bought SWIP from Lloyds Banking Group with an eye to boost its business in the UK. SWIP was struggling with big outflows, while Aberdeen was keen to diversify as it was too concentrated in global equities, emerging market equities and Asia equities.
Schroders, Europe’s second-biggest independent asset management group, bought Cazenove Capital in July, as it sought to boost its wealth management operation in the UK. This was of particular significance as Schroders rarely dabbles in mergers and acquisitions.
Tom Brown, global head of investment management at KPMG, says there are arguably too many asset managers, which makes consolidation sensible. In the UK, there are 2,124 investment management groups. This compares with 319 banks and 193 life assurers, he says, implying that a leaner industry might boost efficiency and productivity.
Mr Bonham Carter’s decision to step down as chief executive also comes a few weeks after Graeme Dell announced he was to quit as group finance officer at Ashmore, Jupiter’s FTSE 250 rival.
Mr Dell’s departure highlights a potential strategic shift at Ashmore, say some analysts. He hands over responsibilities to Tom Shippey, the group’s head of corporate development. Like Mr Slendebroek, Mr Shippey will take up the reins next year.
Ashmore is a specialist emerging market focused fund management group. But similar to other investment companies, it is trying to diversify. In its case, it is diversifying into areas such as equities to win new business.
Martin Gilbert, the chief executive of Aberdeen, says: “It is a tough climate out there. Only the best groups will survive. We are all having to look at our business and make sure we can meet the new challenges in a very competitive market place.”
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.