Winner-takes-all trend gains traction in US asset management

Mutual funds with lowest fees win the most investor inflows

Yet another example of the pressure on fund fees. Regulatory pressure, the drive for transparency, the rise of passive investing and years of uninspiring returns are all playing their part.

43% of US equity funds cut their fees last year. And only those in the cheapest 5% attracted net inflows. All the rest saw outflows. Grim reading.

If you believe in active management and what it can do for investors, the challenge, as ever, is one of education. Yes, there are far too many funds for investors to choose from, and many of them probably aren’t worth the cost. But the simple truth is that the language and the information we provide for investors trying to identify what type of funds they need (let alone choose individual funds) are so unhelpful that it’s hardly surprising that cost climbs up their list of priorities. How else are they supposed to choose?

Arm investors with clear explanations of what different types of funds are designed to do for them, and then enable them to make informed choices of individual funds on relevant criteria, and the results might look very different. Would cost be such a critical factor in fund selection? I doubt it.


Note on the FT:

Theirs is a subscription model. If you don’t have corporate access, sign up for their emails (you can choose exactly what you receive and how often) and that gets you free access to eight articles a month. FTfm on Mondays is all you need to keep up with the big picture developments in our industry, and be sure to catch the always enlightening Merryn Somerset Web every Saturday in FT Money (eg. an excellent reminder recently of the disservice done to investors by our obsession with relative performance: Fund managers and the struggle to be average

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