The current edition of The Economist has a special report on asset management. The first article, by Philip Coggan, The Economist’s Capital Markets Editor, highlights how the fund management industry has and continued to do very well, but for itself. Here’s a quote from the introductory paragraph:
Imagine a business in which other people hand you their money to look after and pay you handsomely for doing so. Even better, your fees go up every year, even if you are hopeless at the job. It sounds perfect. That business exists. It is called fund management.
The article goes on to report that the average profit margin that fund managers who took part in a Boston Consulting Group survey was an astonishing 42%. Fees tend to grow 15% per year despite the industry’s vast size – Watson Wyatt estimated value of all professionally managed assets of more than $64 trillion at the end of 2006. And despite the introduction of lower cost alternatives, such as index tracking funds and ETFs, fund managers have been very successful at maintaining their high fees.
If you have any stories of rip off funds, we’d love to hear from you. Or why not ask your fund manager to join Covestor to showcase the value they truly provide.
You can read the full Economist report here.
