“There’s only a little bit more complex stuff in there,” he said. “It’s not rocket science, and sometimes more smoke and mirrors.” Suhail Shaikh, chief investment officer at Fulcrum Asset Management, would agree that very little of what is being done in multi-asset is revolutionary, but has been largely confined over the last five to 10 years to the hedge funds.
However, hedge funds, just like everyone else have had to cut their cloth according to the prevailing economic winds.
“Historically, cash has disguised fees of two and 20, or two and 30 and it’s easier to justify that when you’re getting paid cash,” says Shaikh.
Regulatory pressure has also been brought to bear and this has driven down fees, but the proliferation of funds means more work must be done with consultants to ensure they understand the skillset and approaches they might be buying into.
Multi-asset funds have been attractively priced relative to hedge funds and they offer liquidity and are therefore “eating the hedge fund cake”, says Shaikh, but says fees are not likely to be forced much lower than they have reached.
“The big fee reduction is already behind us, and at this point, it’s marginal. The cheapest fee does not mean the best manager and breadth requires investment in people and different ideas in different sectors, different asset classes and so on.”
Shaikh believes investors should pay for performance, but never more than a third of that performance and never as much as half as in some cases in the past.
“The more sophisticated, the more breadth, the more investment required, the more the barriers to entry, the higher you can get towards that third,” he says. “The more simple it is, then the lower the fee should be. The simplest would be a FTSE 100 outperformance fund and the more complicated multi-asset funds.”
TOO BIG TO SUCCEED?
But the spectre of capacity hovers over this space as some funds reach sizes that were simply unimagined when they were launched. Trustees, with their consultants, should tread carefully to avoid being caught out.
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