Jump to content

Sign in to follow this  
Pierre-Yves Rahari

Calling for more humility in the industry ...

Recommended Posts

Pierre-Yves Rahari

I just read article written by Tom Coutts, an investment manager with Baillie Gifford, who calls for more humility in the behaviour of the asset management industry, suggesting that the fees charged by asset managers should be aligned with the value [really] created for the investor (https://insight.bailliegifford.com/data/article/details/12242?article=riding-the-gravy-train).

 

Interestingly, AllianzGI follows in Tom Coutts footstep by announcing the roll out of their new pricing philosophy across all their fund ranges i.e. a fee model composed of a low fixed fee (20 to 30 bp) combined with a 20bp outperformance fee (https://www.igniteseurope.com/c/2205013/268733/allianzgi_rolls_pricing_philosophy_across_business?referrer_module=issueHeadline&module_order=1).

 

Humbling, isn't it?

 

Share this post


Link to post

Become a member to read more and join the discussion

Members can read and contribute to discussions

Join us

Register now for free access.

Create your account

Sign in

Already a member? Sign in here.

Sign In Now

Sign in to follow this  
  • Related Content

    • Luuk Jacobs
      By Luuk Jacobs
      The FCA has now recognised the increased use of big data and AI across the Investment Management and banking value change.  It is aiming to better understand the impact it has and will have, the benefits and harms and implications for regulation. One of their focus points in their 2019 Research agenda on the theme of technology, big data and artificial intelligence (AI) is the economics and ethics of this theme.
       
      The economics of the use of big data and AI in general are already quite well understood. They have changed the way of doing business and generating value enormously. Industries have been and continue to be disrupted; examples like Amazon, Apple, Facebook, Uber and even Microsoft have shown how the philosophy of platforms has moved us from single supplier mentality to open marketplaces.  These places where producers and consumers come together in interactions that create value for both parties, whether it is peer to peer or direct to consumer and disrupt the existing status quo.
       
      Platforms are not an entirely new phenomena as it has existed already in traditional open air market places around the world or for example in stock markets. What is new, is the addition of digital technology enabling platforms to enormously extend their reach, speed, convenience and efficiency.
       
      I would argue that the real impact of big data and AI has not hit Investment Management yet. Yes, there is robo-advice providing digital financial advice based on mathematical rules or algorithms (examples like Nutmeg). The majority of them however have been struggling to make their platform economically viable and according to a Deloitte report robo-advisers would need around £6bn assets under management to generate enough revenues to cover their costs. Nevertheless, also Investment Management is at the start of using big data, blockchain/ Distributed ledger technology and natural language processing. The benefits are seen already in better informing (investment) decisions, driving operational efficiency and fraud prevention and compliance.
       
      Arguably lesser known are the potential ethical impacts that will be associated with the use of these technologies while companies move from the traditional commercial yardsticks to include ethical and value-based decision making.
      The established players like Facebook and Alphabet (through the accusations of distributing fake news), Uber (sexual harassment and leadership style), AirBnB (destroyed properties from their users), have and continue to show that the ability to embed ethical awareness and decision making across functions will emerge to be a key attribute of successful digital organisations. The Investment Management industry is to be warned.
       
      Governments are stepping up (the FCA research agenda aims at looking at the implications on regulation) and, for example, GDPR is a first step. Nevertheless, the industry should not be waiting for governments and regulators to step in. I would argue that especially in an industry like Investment Management which is based on trust, companies that put ethics and morality front and centre of their organisation and especially with regards to big data and AI, are more likely to engender the trust of customers and differentiate themselves from competitors in the market.
       
      So what are the ethical questions ‘big data and AI’ that should be asked?  
       
      Can artificial intelligence exacerbate, hide and create unintended biases? Do network effects reduce competition and, in turn, impact consumer choice? How can we be accountable for big data? How do we define big data? How do we adjust risk management frameworks? What are the benefits and, more importantly who will benefit and who might be at risk by this?  
      According to Charles Ellis, CFA, and chair of the Whitehead Institute, Cambridge, Massachusetts, the “biggest challenge” with regards to ethics for the investment management industry is to “find the pathway to reassert the dominance of the profession over the business”; an inherent conflict of interest in the Investment Management business as they are supposed to deliver financial performance both to their owners and their clients. 
       
      Regulation is in the end already in place and leaves little room for ambiguity ie to treat the clients in a fair and ethical way with the general principle to always put the clients’ interest first (AIFMD, UCITs IV and MiFID II).
       
      It is up to the industry now to ensure that these principles are followed and embedded when using big data and AI.  There is no magic pill for it yet, but the market shapers and early adopters will show how easy or difficult this might be.
    • Luuk Jacobs
      By Luuk Jacobs
      I ran today onto one of these quotes and was wondering what others experience is with regards to:
       

       
       
    • Andy Milner
      By Andy Milner
      Since the global financial crisis our sector has experienced a period of unprecedented change. While the various issues of good - and bad - culture in banking have been the focus of much attention, there has been less visibility of the work undertaken in investment management. There is much we can learn from the sell-side and banking culture, however investment management firms operate differently; having different driver, motivations and needs that should be addressed from a sector-centric standpoint.
       
      The Investment Association’s inaugural Culture Forum will provide you with an overview of the major themes that will shape the discussion about culture in our industry over the years to come. Topics for discussion will include a range of critical current and future issues around culture; perspectives on how to assess both internal culture and external influencers; and key indicators to measure a healthy culture.
       
      https://www.theinvestmentassociation.org/training/events/event-details.html?eventtemplate=82-Culture-in-Investment-Management&event=203
       
    • Luuk Jacobs
      By Luuk Jacobs
      With the recent suspension of a fixed income investment director for reasons of due diligence failings and violation of inducement rules, questions are being raised (again) about the conduct and behaviour in the asset and investment management industry.
      With the tithening of risk and compliance rules across the business you would think that these high profile cases would no longer surface. So is this an isolated case (individual or company) or is the risk and control framework as set through regulation for the industry still not effective ? 
Debug info for admin:
appforums
moduleforums
controllertopic
topics/forum ID171
page ID
PHP user agentCCBot/2.0 (https://commoncrawl.org/faq/)
×

We use cookies to give you the best possible experience. If you continue, we’ll assume you are happy with this. For further information, see our Privacy Policy.