Sticking with style is fine if you are running a special situations fund, but it is not okay if you are competing in a market where the only true measure of performance is how much money you make for investors.
You need to do one (or both) of two things: you need to properly communicate with investors and explain why your investment strategy is fit for purpose (see Terry Smith as a fine example), or you need to change course and really show the value of those annual management charges by showing you can change with times.
EGS accountability
We’re just a few weeks in to the year and fund managers have wasted no time in launching environmental, social and governance funds.
The leader of the pack was M&G, which has just launched a sustainable equity fund. One of the aspects of the fund was that it would invest in companies generating gender and ethnic diversity at work. What M&G means by this is that 30 per cent of the board have to be women and from an ethnic minority.
Very laudable. It’s all virtue signalling, of course. Not only is 30 per cent extraordinarily lacking in aspiration, but it seems designed to pass the criteria of M&G’s own board and executive committee, which scrape through with women, but not at all on ethnicity.
Boards are easy to measure and so are easy targets to hit; actual ESG fund managers require diversity from the shop floor and set aspirational targets.
As I’ve said many times before, if mainstream funds were properly accountable then ESG would not be necessary.
Higher climb, harder fall
It’s another record year for equity release. Of course it is, every year is a record when you are a fast-growing product.
The question is how can this last before the mistakes of the past catch up for the sector.
Current lenders celebrate the flexibility, cheapness and the rigour of products, but there are thousands of customers who cannot remortgage left on high rates on inflexible products.
The reputation of this sector has improved hugely in the past 15 years or so. It could all be undone if these legacy products are not changed.
James Coney is money editor of the Times and Sunday Times
