If you look at the UK All Companies sector for example, over 10 years to the end of March 2018, the top six funds - Slater Growth, Lindsell Train UK Equity, our own Liontrust Special Situations, Old Mutual UK Mid Cap, and Royal London UK Mid Cap Growth and SLI UK Equity Unconstrained - have all returned more than 250 per cent.
This is against around 95 per cent for the peer group average and 90% from the FTSE All-Share, the latter representing roughly what you would have got from a UK tracker over the last decade.
There are plenty of other funds offering similar levels of ‘value for money’ but the key, of course, is finding them. I would argue that ignoring things such as process, performance, experience and whether funds are delivering investors’ expectations in terms of returns and risk profile severely limits the chances of doing this.
This dictates that the value for money definition must incorporate more than just cost and the FCA has recognised exactly this in the recently published final findings of its asset management study.
In acknowledging its initial draft proposals in this area “could be seen as too focused on costs rather than the full value proposition of funds”, the regulator’s final rules require groups to publish annual reports proving value for money.
This will be assessed via a range of factors such performance – over a time period appropriate to the fund’s investment objective, policy and strategy – costs and economies of scale.
This looks positive but we will have to wait to see whether these annual reports are enough to help active managers prove their worth.
What is not in doubt is that if active fund managers want to secure market share against the rising passive tide, they need to find better ways of communicating the value for money argument.
John Husselbee is head of multi-asset at Liontrust Asset Management
