Tough times for everyone but looks like it is beginning to get particularly challenging for those overcharging, under performing funds. It was always bound to come, but given the recession investors are talking with their feet and the incumbents are beginning to find life difficult.
Two recent stories only go to highlight the challenges faced by the industry. Bloomberg is reporting huge job losses in Hedge funds and that a staggering 70% lost money in 2008:
worldwide this year, a record 14 percent of the industry’s jobs,
as investment losses and client withdrawals erode fees.
About 920 hedge funds, or 12 percent, closed last year,
according to data compiled by Chicago-based Hedge Fund Research
Inc. Of the 6,800 single-manager funds that remain, 70 percent
lost money in 2008, meaning they can’t resume collecting
performance fees until the losses are recouped. Those fees,
generally 20 percent of investment profits, are the primary
source of cash used to pay bonuses.
In even more telling news the Supreme court has agreed to hear a case that will determine whether investors can blame a fund's advisers for excessive charges:
At its heart, the case speaks to the way fees are set across the mutual
fund industry, and, depending on the court’s decision, could radically
change how much shareholders pay in the future. “Millions of people
invest in mutual funds,” said William Birdthistle, a professor of
securities law at Illinois Institute of Technology's Chicago-Kent
College of Law. “This touches everyone.”
Covestor was established to bring transparency to the fund management industry, to enable ordinary investors to challenge the incumbents. That is becoming more of a reality daily and it is great to have you on the journey.
