FundForum 2012 LIVE: European investors less patient with underperformance, says Lipper
European investors are more ready to redeem their capital from underperforming funds than their US counterparts, according to Lipper’s latest analysis of the European fund industry, which examines the different pressures on fund management companies in balancing business and investor interests.
The report, whose findings were presented at FundForum International by Ed Moisson (pictured), Lipper’s head of UK and cross-border research, says redemptions have averaged 55 per cent a year over the past three years for European cross-border funds, but only 30 per cent in the US mutual fund industry.
The Lipper research found that bond funds have been the asset class to enjoy the greatest inflows in recent years, but the concentration of sales is pronounced. In 2011, nearly 50 per cent of flows, or EUR83.4bn, went to just over 5 per cent of the bond funds that enjoyed inflows – 145 out of 2,546 funds.
Comparing gross and net returns – before and after costs – for actively-managed equity funds domiciled in the UK, over 10 years the average fund returned 71.2 per cent. However, the average fund manager returned 98.7 per cent (before the total expense ratio, meaning that on average, costs have reduced returns by 27.9 per cent over 10 years.
“This analysis suggests that fund companies care about clients as far as it makes business sense to do so,” Moisson said. “To do otherwise would be to make business decisions from a moral perspective – or for fiduciary responsibility to be extended to fund fees. But fee levels cannot be viewed in isolation, and one must also consider the challenges that fund management businesses face.”
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