My bedside radio was playing “I got you babe” – not a good omen. I was in Nice to attend the Fund Forum conference and was expecting some déjà vu, since I had been away from the European funds scene since the late 1990s.
As anyone who has seen the movie ‘Groundhog Day’ will know, Bill Murray’s character is stuck in a recurring nightmare day, which always starts with a burst of Sonny and Cher. I looked at the topics for the conference programme: “The challenges of establishing a successful business in Europe”; “A vision for the single market”, “Managing the challenge of changing investor dynamics”. All very familiar sounding.
At the conference centre, it was great to see many old friends and acquaintances, but a strong feeling of ‘been here and heard this before’ came over me whenever I sat down to listen to a speaker. Any conference has two main aspects to it; the formal sessions and the networking. Fund Forum is big on both, with four days set aside for presentations. Where the organisers perhaps need to pay more attention is in who they get to tackle some of the key topics. Too often, it is simply a case of allocating speaker slots to those who sponsor the event. Everyone seems to agree that this has gone too far and that the quality has dropped off sharply as a result.
The session at which a group of five senior executives were sat together on the main platform was a perfect example of an opportunity missed. Poorly moderated by a representative of one of the event sponsors, the first day’s session never took off and the second day’s was lively but lacked direction. What it did show though is that the average fund group CEO does not understand just what a poor job they have done in communicating with their market.
It has taken the financial planning industry generally far too long to realise just how much of a problem this latest bear market has created for them. It will take many years for fund managers to regain the trust of their investors. But to judge from the attitude of the majority of CEOs at Fund Forum, they don’t see it that way.
Could we actually get to the point where we are discussing the practical application of more flexible product platforms with the end user in mind? It is mind-numbingly awful that after three years of a bear market for stocks, speakers at Fund Forum are still harping on about the tech bubble and why it happened. We all know why it happened, but what are we doing about it, what have we learned?
In between the corporate blindspots, there was still plenty of good quality material to be found, as you would expect of a four day conference that attracts such a high calibre of attendee. Professor Andre Perold of the Harvard Business School talked about how the industry structure should move towards a concentration on providing alpha and effective distribution. This could imply that we are moving in the right direction with the trend towards ‘open architecture’ and the wholesaling of fund management.
Above all, he said asset managers must play to their strengths. In simple terms, Perold said that large fund houses will lead distribution, leaving hedge funds and other smaller houses to provide the alpha. Successful groups will need an edge in trading and a proven capability to manage portfolios on the short side. Successful platforms will be those that match an asset class to the available skills within an optimum amount of assets.
Recently departed Credit Suisse Asset Management CEO, Henry Wegmann suggested that a key success factor for the future will be to “explain what you do and deliver it”. Truth in product labelling, a flexible product offering should underpin this: “A sales strategy geared towards only one scenario will eventually hit the rocks. In the current cycle, equities could remain unattractive for another five years. So the nature of fund marketing has to change.” Note he is not saying stocks will be unattractive, but they could be, and what will your business be like if they do?
Fund Forum did produce some moments of lively debate, notably when Deutsche’s Paul Manduca suggested that asset managers need to be allowed to work more closely with pension fund trustees, or when Richard Garland of Janus picked a verbal fight with CSFB’s Jeff Peek on the question of truly ‘open’ architecture. If these issues could have been discussed in greater depth, that would have been very useful. Equally the good workshop sessions all came to an end too soon. There must be about 100 different sessions over the four days. If there were fewer, the quality of content would probably be higher.
Then I woke up, to the strains of: “They say we’re young and we don’t know.”