[Weekly Wrap] Regulators need to be careful with funds firms

• Tweet

If video killed the radio star then regulation could kill some fund managers. Here's why.

Friday, August 29th 2014, 11:50AM 1 Comment

During the week I was sent this article which argued that active managers are dead and passive will win the day. The premise of the article is that it's getting harder to find returns - or the returns of the good old days are something from the past - and fees have to come down.

The equation says this equals unprofitable businesses.

This argument between active and passive has gone on for the 25-plus years I have reported on funds management and is likely to go on, unresolved, for as long as I report on the area.

When I was sent the article my initial response was that we had seen the opposite in New Zealand with the emergence of many boutique managers. Also there is clear evidence that in New Zealand active managers can add value with equities.

If fund managers are under threat, it's not so much from the economics. Rather regulation will kill them. (Next week we will show you a story of a boutique manager that is doing pretty damn well).

The threat is all the new requirements being put on managers, particularly under the recently enacted Financial Markets Conduct Act. To get a licence and meet all the other requirements significant demands are being placed on firms - which seem, like much of the regulation, as an over-reaction. The biggest loser in all this will be investors who are robbed of choice. 

It's not just me who says this. It was confirmed to me in a conversation I had with a person who plays in the boutique space and understands regulation.

There are many good boutique managers offering their wares in New Zealand and it would be shame to lose them.

This week has seen an interesting mix of news. A story we posted in People this afternoon was a changing of the guard. After 17 years plus years with ANZ Investments (previously know as Armstrong Jones, ING and Onepath) David Boyle is moving on. 

His new home is an interesting one which which is going through lots of change (again more on this next week).

A story which has a lot of traction, and is the subject of much discussion, at the moment is the demise of van Eyk after it froze some of the funds in its Blueprint series. It appears the fallout from this is going to continue for some time. Our latest stories are here and here.

It's interesting to see what has happened to this Australian-based firm in light of the earlier comments and to consider what regulation can really achieve. 

Comments from our readers

Sign In to add your comment