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falling
A
consultant reflecting on the
parlous state of the asset man-
agement world compared the
pre- and post-crisis ambience of an
after-party at an annual industry get-to-
gether. In 2005, attendees were treated
to unlimited alcohol including cham-
pagne and well-aged spirits.
A decade later, the unfettered booze
supply had morphed into carefully en-
forced, rationed beer and wine alloca-
tions. The budgets at asset managers are
being constrained, but what impact is
this having on the custody industry, and
how is it responding?
Active management has a number of
merits, but performance at many has not
been in line with client return expecta-
tions. Low interest rates, volatile equities
and irrational politics have been market
drivers, making it hard for firms to pro-
duce returns based on the metrics that
they are used to and most comfortable
with. Many investors are also wondering
why they are paying between 0.75% and
1% in management fees when numerous
active firms have failed to beat their
benchmarks. The alternative to spend
just 0.1% or 0.2% in management fees
to have exposure to an index tracking
product or robo-advisor is therefore
quite appealing. Many active managers
have had little choice but to reduce fees
to keep their clients.
Regulatory transparency drivers
around cost breakdowns have also in-
vigorated investors, many of who