In a world where investors are flocking to dirt-cheap index funds and comparatively low-cost smart-beta and quantitative options, active managers are under intense scrutiny to outperform — and earn their heftier fees. To that end, they’re looking to a slew of new tools, including portfolio analytics software, to help them gain an edge in the cutthroat envrionment.
Pension fund trustees, analysts for brokerage platforms, and other gatekeepers are increasingly tough on actively managed funds, knowing that cheap alternatives are available that might not be excellent options, but which are increasingly good-enough options, says Michael Ervolini, CEO of Cabot Research, which uses research on behavioral finance and data analysis to determine a portfolio manager’s skills when it comes to buying and selling stocks, as well their talent at sizing positions.
“Investors have made it abundantly clear that they are no longer willing to pay substantial active management fees in return for little to no excess return above readily available passive or index products,” Ervolini says.
He adds that active managers today feel they need to beat their benchmarks more consistently, and by wider margins, and they need to do it at a lower cost. Cabot expects that the average active manager will be expected to deliver excess returns of between 0.5 percent to 1 percent before fees annually. It estimates that fees should then be between 20 and 35 basis points.
More here – Institutional Investor
PS : Here is a left solution – actually do what you are paid to do and make money for your clients….silly me, what a foolish idea.
