The five New York city pension funds, managing almost $160bn, appear to have just noticed quite how much they pay in fees to money managers, and the number of elderly teachers, fire fighters, police and civil servants that money might help support.
The New York Times reports the funds paid more than $2bn over the last 10 years, and got little in return, according to city Comptroller Scott Stringer:
“We asked a simple question: Are we getting value for the fees we’re paying to Wall Street?” Mr. Stringer said. “The answer, based on this 10-year analysis, is no.”
Hey you, everyday rich person. Like many normal people in the top tenth of society, you probably think a few hedge funds sure would be interesting. If only there was a really great website…
No? How about a “Google of investment”, or something more conscionable? Read on for the new face of asset management. Read more
Pieria has some stats from Citywire on the tenure of fund managers in its database of 17,000 funds, judged to be one of the important factors that financial advisors say they consider when choosing funds for their clients.
The advisors averaged about two decades worth of experience. The fund managers, not so much. Read more
Mark Schofield and his team of macro strategists at Citi have a new watchword: diversification. The bank has a major new paper on the matter (one of its occasional Citi GPS series), arguing that we’ve all been wrong to sit about expecting, at some point, a sudden rush for the exit in bond markets and a consequent rebalancing of equity allocations. Read more
To take a tiny bite of a very large subject, what is the ideal asset allocation for a long-term minded investor?
Providing an answer has made a lot of people a lot of money over the years, typically when couched as a response to another unanswerable: how much risk to you want to take? (Er, a bit, but not too much. What do most people do?)
The typical answer that is sold, however, has changed over time as well. Read more
Ashmore, the emerging markets specialist, fell victim to the taper at the end of last year. Outflows of $3.5bn in the last quarter, more than 4 per cent of its $78.5bn total, as well as some fee changes, had the market a little spooked on Tuesday.
Although huge, all conquering, dollar-scooping behemoths of asset management would also seem to work.
Towers Watson and Pensions & Investments have counted up money manager dollars world-wide, once again, and when it comes to size, passive investment products are (almost) the only game in town. Read more
Hackles were raised across the managed futures industry this month by a Bloomberg exposé of high fees and poor performance. (One we used to riff on diversification as the asset management bait and switch).
Attain Capital has taken to its blog to respond. You can read their extensive and detailed response, including rebuffs from the editors of Op-Ed pages here, but we thought we would summarise the main points and then add a few of our own below. Read more
Where then should Neil Woodford lie in the pantheon of great investors?
The UK’s superstar investor has run the Invesco Perpetual High Income fund since October 1988, but will part ways with the firm next year to set up his own shop.
He has a pretty good record, built in the last 15 years on two good calls in particular: avoiding tech stocks in the late nineties bubble, then applying a similar skepticism to banks before the more recent bear market.
But how would he have fared atop an Omaha insurer? Or picking cheap growth stocks in the US, like the once great Bill Miller? Could he steer a bond market behemoth while writing provocatively, changing his mind and getting away with it? Read more
We’ve been looking recently at the false promises of a zombie hedge fund industry. Now let’s widen the lens a little to take in asset management more broadly, and the self-interested warping of a concept at the heart of investing.
Start with this terrific piece from Bloomberg, about how investors have been gulled by the supposedly respectable brokers of Wall Street selling investment products known as managed futures. Read more
We are reading the Office of Financial Research report on Asset Management and Financial Stability, which is both interesting and educational.
More to come, but having spent time looking for these numbers in the past, the two tables on where the money lies in the US and who looks after it are worth bringing to a wider audience on their own (click to enlarge). Read more
The ‘great rotation’ from bonds into equities: a few weeks ago it was looking like it might be seriously on. Even Albert Edwards sort of kind of said equities were cheap. And Ray Dalio said it is happening, too.
But there are a bunch of reasons why it doesn’t seem to be quite such a sure thing, at least for now. Read more
Bit of a Volcker Rule/whither market-making talker from the WSJ… BlackRock is back touting post-bank ‘internal’ trading for its clients.
Feels like it’s been building a trading platform since forever actually… Read more
The auction process to sell Deutsche Bank Asset Management is faltering after JPMorgan and State Street withdrew from the bidding, making it more likely the bank will have to break up the business as part of a prolonged sale of the assets. Deutsche Bank had raced ahead with the sale process in the past week, narrowing interest from a wide range of potential bidders to a shortlist of a half a dozen, before the leading contenders withdrew. Ameriprise, another candidate to buy the business, is baulking at the price and could soon withdraw, the FT says, citing people familiar with the situation.
Goldman Sachs is to beef up its asset management business as part of a strategy to tap into the retirement savings of a wave of ageing baby boomers, says the FT. Goldman Sachs Asset Management, a unit of the Wall Street bank, has agreed to buy Dwight Asset Management for an undisclosed sum. Dwight, which is based in Vermont, specialises in so-called “stable value” money management, which aims to deliver safe and consistent returns to investors in a similar way to money market funds. Dwight has $42bn of assets under supervision, and is now on track to become part of GSAM in the second quarter of the year. Goldman is buying the firm from Old Mutual Asset Management, part of the London-based savings group, Old Mutual.
In the words of Goldman Doc, Morgan Grumpy, JP Happy, Bank of Sleepy, Barclays Bashful, Sneezy Citi, and Dopey Deutsche:
We dig dig dig dig dig dig dig from early morn till night
We dig dig dig dig dig dig dig up everything in sight
We dig up diamonds by the score
A thousand rubies, sometimes more
But we don’t know what we dig ‘em for
We dig dig dig a-dig dig
A scathing report prepared for the California Public Employees’ Retirement System has found that asset managers paid about $180m over the past decade to win business at the largest US public pension fund, the FT reports. As state and federal investigations into the use of so-called “placement agents” continue, the conclusions of the 17-month review recommended policy changes at the pension fund and point to further action at Calpers and other funds. Bloomberg adds that Calpers said it will take steps to prevent investment decisions from being corrupted by middlemen.
FT Alphaville has been researching the issue of so-called ‘liquidity transfers’ ever since we first came across the matter in Life & Pension Risk in October.
As Risk noted at the time, there’s been an increasing trend for banks to swap their illiquid Asset-Backed Securities (ABS)-style assets for much more liquid securities held by pension and insurance funds via extremely long repo arrangements. Read more
It may not be the workings of an Anna Chapman-style Russian sleeper cell.
But it is a case involving suspected double-agents. In the asset management industry. Read more
Royal Bank of Canada has struck a £963m ($1.5bn) deal to buy BlueBay Asset Management, reports the FT. London-listed BlueBay’s shares jumped by 30% on news of RBC’s 485p per share offer, capping a turbulent year for the UK bond and fixed income asset manager and netting millions for its founders Hugh Willis and Mark Poole. At a a 29.1% premium to BlueBay’s Friday closing price the deal will hand Willis, chief executive, and Poole, chief investment officer, a windfall of £81m each from their 8.5% stakes only months after they each sold £21m of shares into the market. After number-crunching, Lex notes that the price is not a particularly high premium to pay for control of BlueBay and its ‘rarity value’.