Three global fund mangers have urged Australia’s investment industry to bolster active management and challenge concerns around fees and costs.
Baillie Gifford, Capital Group and MFS Investment Management have teamed up for what they have claimed as the first collective of fund managers representing the active management sector.
The three companies will be hosting forums in Melbourne and Sydney on Wednesday and Thursday for institutional and professional investors around active investment and the role it plays in the superannuation industry.
They have followed the trio’s similar London-based program, featuring academics, portfolio managers and economists as well as investment strategists and business heads from their firms.
Company country heads Rosemary Shannon of Baillie, Paul Hennessy of Capital Group and Marian Poirier of MFS have said it has been harder to see the case for active investment management as passive investing has accelerated during the last decade.
The three leads have pointed to cost bias and a lack of context consideration placing investors at risk of overreacting to short-term market moves and to missing out on long-term growth opportunities.
“Active investment management is as logical and compelling today as it has ever been. The intense focus on fees and costs, however, means less attention is being given to the fuller set of factors that drive investment outcomes,” the trio commented in a statement.
“You cannot look at fees in isolation; it is the end outcome that matters to investors, especially those entering the retirement phase.”
They admitted the average active equity manager however had not delivered better results than passive equity fund over the long term, but have insisted that there is a “subset” that consistently outperform both passive funds and the broader market.
“This outperformance over the long term makes a massive difference to the wealth outcomes of retirees, especially in a market downturn when alpha and downside protection is critically important in contributing to capital preservation,” the three leads said.
“In the current global investment environment, forward market expectations are low. Investors are likely to see good active managers with strong research capabilities, a global network and long-term perspective generate a higher percentage of their overall total return.
“Active investment has proven to be a strong source of alpha over many decades, and it is this firepower that needs to remain within a portfolio in order to achieve retirement wealth outcomes.
According to the three firms, Australian funds have generally invested with good active managers – they just need to stick with the players who consistently outperform over the long term.
They also noted chief investment officers and portfolio managers need to ensure investment committees understand factors that underpin good investing: fees, active managers who co-own the funds they managing are more likely to deliver excess returns, context for the performance of a strategy, time horizons and stewardship.
“The long-term wealth outcome for members is at stake,” they said.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].