ANNOUNCEMENT: Expert Investor is now PA Europe. Read more.

Turning up the heat on active managers

Active managers are under fire from all sides. Regulators in the Nordic countries are leading the attack on closet trackers, and cheaper ETFs are eating market share. Fund selectors are looking on this favourably, though the asset management example is not followed by the wholesale sector in every European country.

Funds which closely track their benchmark have become a no-go area for self-respecting fund selectors. Sweden, the original home of Niclas Hiller, now the chief investment officer at Norwegian wealth manager Formuesforvaltning, was the country where benchmark huggers first came under scrutiny last year when the Swedish Shareholders Association launched a lawsuit against Swedbank Robur for selling funds marketed as active which in practice closely followed their benchmark.

“40% of mutual funds in Sweden are closet trackers,” says Hiller. “It’s actually a big scandal.”   

In Switzerland, a country of similar size as Sweden, the situation is little different, says Joachim Klement, CIO of the local investment consultancy Wellershoff & Partners. “The vast majority of products have a very low tracking error. These are the kind of guys who do one or two bets every year and then do nothing,” says an outraged Klement.

 

Away from the murky middle

So no surprise he is trying to push his clients out of what he calls ‘the murky middle’. He finds a much better proposition in passive funds. “You can get passive and factor exposure extremely cheaply,” he says. When it comes to active funds, they should really live up to that. “I want a high tracking error, a high active share and a fund that can go anywhere,” says Klement. “If I pay a management fee 1.5%, I want to see a tracking error of 4 or 5, otherwise that alpha will never end up in my portfolio.”

Andrew Summers, head of collectives and fund selection at Invest Wealth & Investment, believes Klement’s opinion is representative for the wider fund selector community. “There are lots of inflows into high active share funds and passive funds, and no inflows or net outflows from not very active funds,” he notes.

  • Can M&A and buybacks breathe life into UK market?

    Can M&A and buybacks breathe life into UK market?

    Both buybacks and M&A should help realise value in UK shares, boosting prices and giving investors another reason to consider the UK stockmarket Not only does M&A activity appear to be picking up, with a high-profile bid for UK electronics retailer Currys, but the scale of company buybacks continues to accelerate. If it goes well,…

  • Capital Group launches multi-thematic Article 8 funds

    Capital Group launches multi-thematic Article 8 funds

    Capital Group has launched a set of multi-thematic sustainable funds that are available for investors in Europe, writes Christian Mayes. The Capital Group Sustainable Global Opportunities fund (LUX) will invest in global equities, while the Capital Group Sustainable Global Corporate Bond fund (LUX) will target fixed income exposure. The launch also includes a multi-asset offering…

  • Bond funds pull in €29.7bn in January – LSEG

    Bond funds pull in €29.7bn in January – LSEG

    Bond products were the best-selling asset class in January, according to LSEG Lipper’s European Fund Flow report, writes Christian Mayes. The asset class pulled in a net €29.7bn in the month, while Money Market USD grouping was the best-selling Lipper Classification after receiving €11.2bn inflows. Providers of mutual funds pulled in €22.5bn, while passives saw net…

  • Quarter of Article 8 funds at risk of greenwashing – MainStreet Partners

    Quarter of Article 8 funds at risk of greenwashing – MainStreet Partners

    A quarter of all Article 8 funds could be accused of greenwashing based on their sustainability framework and practices, according to MainStreet Partners, writes Christian Mayes The 24% of funds classified as a greenwashing risk by the 2024 ESG Barometer report marks a four percentage point increase from the 20% flagged at the end of…

  • EU green rules could stymie decarbonisation projects – ExxonMobil

    EU green rules could stymie decarbonisation projects – ExxonMobil

    The European Union’s climate regulations may lead to it halting its investments in Europe, ExxonMobil has warned. Speaking to the Financial Times, Karen McKee, president of the product solutions division, said the oil and gas giant had struggled to begin decarbonisation projects in Europe due to the regulatory burden. The result, she added, was that…

  • ICE flags need for Europe to double green investment

    ICE flags need for Europe to double green investment

    Investments to modernise energy and transport must double by the end of the decade to reach 2030 climate targets, the EU has been warned. According to the Institute for Climate Economics (ICE), which has released the European Climate Investment Deficit report, the bloc lacks what it calls a “consistent tool” to ensure monitoring of the…