Newspaper article The Evening Standard (London, England)

Funds Managing to Survive - Just

Newspaper article The Evening Standard (London, England)

Funds Managing to Survive - Just

Article excerpt


THE takeover of fund management group New Star by Henderson last week had been so well-flagged it could surprise no one, but it was nevertheless unusual. There are hundreds of fund management groups and thousands of retail funds in the UK u there are indeed more funds that aspire to invest in British equities than there are shares quoted on the main market of the London Stock Exchange, which has to be a definition of overcapacity in anyone's language. But fund management is not a business that lends itself to consolidation, however desirable it might be.

It is a similar pattern across Europe.

The population of the European Union and the combined gross national product of its member nations are just a little ahead of that of the United States.

But the number of mutual funds and fund management groups serving the European retail market is massively more than the number which serve the domestic US.

It is also the case that the size of the average mutual fund holding in America is significantly larger than the equivalent European holding, and the charges over there tend to be lower.

This is not intended as a paeon of praise for the US retail savings industry.

It has many shortcomings, not least in its failing to reach standards of governance taken for granted in Europe.

But what the industry figures do suggest is that there are far too many funds in Europe spread among too many managers. The consequence is that there are not enough economies of scale, the available fund-management talent is spread too thin, and charges to customers are too high u particularly in the context of the returns these funds tend to generate.

And there are hundreds of funds out there u launched to cash in on whatever was the fashion at the time u in which not even the management company shows much continuing interest. …

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