Asset management: as one elephant vanishes, at least two others appear
These disappearing acts are the industry’s way of losing its black sheep
We have written about the “elephant in the room” before – the self-serving investment practices that benefit service providers at the expense of their clients. Burying poor past returns falls into that category. Asset managers tend to offer a range of funds. A few do well and attain flagship status, but others perform poorly and settle at the wrong end of the rating table. They suffer outflows and do nothing for the manager’s reputation. It makes no business sense to keep these going, yet simply closing them down comes with reputational risk. Instead, the underlying investors are transferred to a more “appropriate” fund and assume that fund’s track record. This also enables the manager to retain the assets, and the associated fee income, before the remaining clients move their money elsewhere. In a rare mea culpa, Stanlib recently announced it would close 15 unit trust funds because its range was “too complex” and no longer appropriate. South Africa’s third-largest asset manager hop...
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