Old Mutual unit defends its fees

OLD MUTUAL Global Investors chief executive Richard Buxton said he felt no pressure to reduce fees on the firm’s funds even after a UK regulator found evidence of “weak” price competition among some of the nation’s asset managers.

Buxton, who helps oversee about £27 billion (R464.5bn) in assets, said he had no issue with the Financial Conduct Authority’s (FCA’s) focus on fees if it stopped so-called closet tracker funds from charging for active investment. He contrasted such funds from his firm’s “high-conviction” strategies.

“I don’t worry about fees,” Buxton said at a media roundtable in London. “There is a lot less fee pressure when you make returns. Clients don’t mind paying for high alpha.”

After a yearlong review of the industry, the FCA said last month that it found evidence of poor value for money in both active and passively managed funds. The regulator suggested a number of initiatives including firms charging investors an “all-in fee” to promote greater transparency.

In addition to regulatory pressure, competition and poor performance had placed “very strong pressure” on global money managers to lower fees, a top strategist at BlackRock, the world’s largest asset manager, said in October.

The regulator’s “price-conscious mindset” was pushing more customers toward passive investing, Buxton said. That might not result in clients receiving real value, as price had to be weighed with other factors such as how much alpha was generated, Buxton said.

“As an investor, I don’t worry about the move to passives as it creates opportunities,” he said. Old Mutual managers were “high-conviction investors”.

“There is a view that as long as you are cheap enough, then you are good value. That’s not always the case,” he said. – Bloomberg There is a lot less fee pressure when you make returns. Clients don’t mind paying for high alpha.