There is something else to this though, as the move away from benchmark huggers makes active managers look better, and this could lead to a revival of the fortunes of active management in general, says Summers. “If you struck out the quasi-tracker funds from the active universe, all of a sudden the performance statistics of active management look much better compared to ETFs.”
Cost issues
The rise of ETFs and the more extensive cost transparency requirements by MiFID II have also resulted in increased cost awareness among investors. “The biggest change I have seen in the UK in the last three or four years is the increased focus on costs,” says Summers. This also the case for wealth managers. “If your TER starts with a 2 now, you have a real problem.”
But there are still some pockets of resistance to this trend, Klement has observed. “A few years ago, there was a decision by the Swiss federal court which said all retrocessions have to be given back to the client. But what happened? Many Swiss banks changed their terms and conditions, to specify retrocessions belonged to the bank,” Klement explains, adding:“Several banks increased fees for their fund-of-fund products, while at the same time decreasing their fees for ETFS following the pressure from Blackrock.”
Tillmann Sachs, CIO and head of research at J8 Capital Management in London, who will be launching his own UCITS absolute return fund early next year, did not entirely agree the trend of ever lower management fees is feasible. “A manager who has the right edge deserves a good living,” he said. “Managing a fund has also become more costly because of the increased regulation. And once we see a serious market correction, clients will see the benefit of active funds.”
