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Industry overdue for a Change?
Change is on the
way, we know it, everything in life and business changes all
the time. So why should the Fund Management Industry be any
Given how the industry evolved from a comparatively tiny
base over the past 50 years nobody should be surprised that
more changes are coming over the next 50 years (if
civilisation lasts that long given that reckless gamblers
seem to have their finger on the nuclear buttons).
But who knows
where the journey will lead us? All one can really do is
hire and employ smart people, stay lean in terms or cost and
avoid being panicked into poor decisions.
Most people need help with their finances, passive investing
will not wipe out good active management and bringing
billions of people into a situation where they can afford to
save will offer more than enough opportunities for the
first sight it appears reasonable to wave any fund
management fee if the performance does not match the agreed
benchmark. And why not ask the fund manager to make a
penalty payment as well? But to be serious, any business
that agrees to a zero fee would not be viable in the long
run. Better to agree fees to be calculated on a (three
year?) rolling basis and set the fee in a narrow zone, for
example basic 1% and a band of +/- 0.5% to adjust for
Softbank acquires Fortress - Marriage made in Heaven or Hell?
could be no greater discrepancy between the business model of these
two parties. Apart from the fact that Fortress alone already has its
fingers in too many pies,
this deal seems to increase the impact of 'diworsification' by
the power of two. It will be interesting to see how this pans out
over time. In the meantime, hats off to the Fortress Principals, it
looks like an excellent deal for them!
FCA Report on Fund Management
always reassuring that the cast of thousands employed in the
recently-established regulatory silos are put to good use. Even if
it is mostly confined to produce volumes of paper that unfortunates
in the businesses that they are regulating are forced to plough
Another painful lesson from a disastrous Acquisition
Unicredit finally has extricated itself from its exposure in the
Ukraine serves as a reminder that 'Strategic Transactions'
(Acquisitions, Disposals and Mergers) need the utmost attention and
best Advice. We are proud to document that we voiced
serious doubts when similar acquisitions were conducted some
years back (a close look at the 'Mergers and Deals' Blog entries
offers a salutary lesson in Merger Hybris).
The usual suspects among the coterie of advisers (Investment
Bankers, Lawyers and Accountants) may all be worth their money but
they are not always on your side as they tend to have a financial
incentive to make sure that a deal goes through, whatever the
rationale behind it.
Illiquid Bond Markets? - Brace Yourself!
Not much has to
be added to my
post from October 2014. Maybe the move to automated bond trading
has accelerated a bit, but I would not expect that to be of any help
when markets become stressed. But the issue is not off the table,
and given the
voices of prominent market pundits it is obvious that no one
really knows what will happen if a major bear market in bonds
arrives. But investors should remember that bonds are a conservative
investment, or at least they should be. That means investing with a
view to hold to maturity, so there is no real need for liquidity.
Future of 'Universal' Banking Model in doubt
The sudden exit of another Bank CEO - now at Barclays Bank -
is a stark reminder that managing a 'Universal' Bank requires
near-superhuman skills, and a good portion of luck (or friends in
high places as JP Morgan's Jamie Dimon or Lloyd Blankfein at Goldman
Sachs would probably confirm).
The business model
did work quite well in a period of slow technological change,
markets that were quite insulated and regulation that kept unwanted
But a universal bank
is basically nothing but a financial conglomerate and the
conglomerate model - while offering certain advantages - is not one
that has demonstrated that it is likely to be successful in the long
Who still remembers names such as LTV or Gulf+Western? Both were
high-fliers on the stock market until they hit the buffers as they
become unmanageable, their mastermind retired or they hit
unfavourable economic headwinds.
QE - should you laugh
More and more desperate calls for all-out QE in the Eurozone make
me laugh and cry at the same time. Laugh because it is not very
likely that the hoped-for revival of the economies in the weak
member states of the zone will happen. One has to look at the
micro-economic aspect of the problem: why would any business
invest/hire just because the rate of borrowing has declined by
some small fraction? Given high tax rates - and they are going up
all the time, openly or in stealth fashion (think 'fees' and
'charges' by public bodies) it should be expected that the
entrepreneurial class will cut back on its work load. Why not take
it easy if the larger part (60, 70pct if one adds in tax on taxed
income, i.e. VAT, stamp duties etc etc) of additional income is
confiscated by a parasitic caste of politicians, bureaucrats and
their favoured beneficiaries? And why would I cry? Because the
chances that the march into ever-higher control of our lives via
the permanent avalanche of ill-thought-out legislation and higher
taxation/spending is not going to be reversed anytime soon.
planning at Santander - an example to follow
announcement of the death of Emilio Botin, the man behind the immense growth
of Banco Santander over the past decades, highlights the need to prepare for
the smooth handover of leadership.
While Santander may appear to be a special case - the succession is clarified
on the next day - every business should be able to replace key personnel
without delay. This applies not only to CEO roles but all managerial positions
in the organisation. Internal promotions should be the rule as they boost
morale and team spirit and usually are cheaper and quicker to realise.
Regulation: Race to the bottom?
Scared about Brexit?
Top firms sign up to 'name-blinding' plan
Read more on:
Coaching and Mentoring
Mergers and Deals