Entrusting your money with a boutique comes with a risk, since such managers tend to be less benchmark-constrained than their blue-chip peers. “Sometimes it doesn’t work out as you expect, but we like to give our managers a wide mandate. Investing in smaller, relatively unknown managers is also a way for us to distinguish ourselves from the large banks, that do not have funds like Vector Navigator on their shelf.”
Fees
The not so competitive fee structure of Vector Navigator may also be a reason it is not attracting a lot of inflows. The total expense ratio of the fund is a hefty 2.08%. On top of this comes a performance fee of 20%. “I’m not a big fan of performance fees,” Van de Ven admits. “I prefer funds that don’t charge a performance fee, but it’s obviously not a condition.”
Accuro isn’t paying the full charge though: “Since we were among the early investors, the kickbacks we receive are significant, and we pass these on to our clients,” says Van de Ven.
And the very issue of the performance fee may assure the fund indeed doesn’t grow too big. It will deter some investors to invest in the fund, and removes an incentive for the fund managers to raise assets. “Because of their continuous outperformance, they have made a lot of money from performance fees in the period between 2009 and 2015.”
Smart beta
Considering the substantial fees Vector Navigator charges for a fund that is essentially based on a quantitative model, why does Van de Ven not opt for a smart beta fund instead? After all, these funds are significantly cheaper.
But Van de Ven is not convinced about this option. “Quants-based funds have to be self-learning and continuously adapt their models to stay ahead of the game,” he says. “We have no smart beta funds because these funds are often back-tested and static. They may perform for a while, but eventually smart beta outperformance is always temporary as it is subject to arbitrage.”
