Investors looking beyond performance
Future investors will pay less attention to past performance statistics and demand much more information about all aspects of potential investment managers, according to PriceWaterhouseCooper’s 1999 Investment Management Survey of 32 UK and Irish managers with funds over £5bn, entitled ‘Pursuing Profitability – The Open Question’.
Graham Wright, partner at PWC and author of the report, says consumers are starting to question how there can be so many ‘out-performers’, particularly in the light of recent poor performance, and realising that past statistics are not cast iron future performance indicators.
“Clients are starting to look at issues such as value for money or incentives for risk control within asset management houses – questions which a lot of managers might be embarassed to answer. Product and service features as a whole are becoming more prominent as investors become more demanding and less accepting. The trend is very much to look under the bonnet these days not just at the dashboard.”
Wright also says that the advent of formalised performance standards could, over time, lead to a comprehensive ratings system for investment managers.
The survey also reveals that 1998 was a year of pressure on fund management revenues, with average profitability falling to 29% from 33% in 1997. Tellingly, two-thirds of the firms recorded lower profits over the year. Wright believes this indicates that some managers are not adequately managing business costs.
“This has to become a higher focus because costs have risen by around 30% just in the last year and 1998’s volatility has meant that they haven’t been masked by the market effect.”
Further issues such as e-commerce, globalisation or even a market crash will inevitably force investment houses to change management approaches, the survey argues. Hugh Wheelan