Martin Gilbert: Industry must cut failing funds
City grandee Martin Gilbert has called for asset managers to cut the number of small funds on offer in a bid to stem the bleeding of profit from the entire industry.
Speaking to City PM, the Assetco chair and Aberdeen Asset Management founder said that some “basic housekeeping” was needed to bring down the number of failing funds in the industry, as “the industry needs to consolidate”.
“It’s not rocket science,” said Gilbert, adding that “big funds do better.”
He cited the firm’s Global Income and Growth fund, which he said began receiving a surge of inflows once assets passed £100m.
Assetco’s annual results this morning revealed that the group had cut its number of open-ended funds from 25 to 20 by the end of last year, with plans to cut them further to 16.
In “distribution-led” managers especially, Gilbert warned that niche funds are frequently launched to attract new investors, but “when they fail, they leave them, not merge or kill them.”
While this wasn’t a problem when business was booming, now the industry is suffering more than ever, and Gilbert argued that “you have to look at what you can control” when it comes to cost-cutting.
Assetco’s results also revealed that it had cut the number of staff on its active equities business from 119 to 74, with Gilbert saying it was looking to make further cuts to the most expensive part of the business.
Layoffs have been spreading throughout the industry as asset managers have sought to consolidate, with managers such as Abrdn and Fidelity laying off hundreds of staff in recent months.
Assetco also sold off portions of its business that were loss-making, with Rize ETF being bought out by Cathie Woods’ Ark Invest in September.
This morning, the firm’s results indicated that its recent acquisition of India specialist Ocean Dial could serve as a springboard for new exploration into emerging markets.
Martin Gilbert said the firm saw a clear route into emerging markets “through both acquisition and organic growth.”
“India to a large extent has all of the advantages of China without the close scrutiny of government,” Gilbert said.
As prices across the asset management industry continue to fall, Gilbert added that the firm was “always looking” for further acquisition targets but stated that there was “nothing imminent”.
Since the start of the new year, Gilbert said business had “still been tough, but not as tough”, and hoped that a decline in interest rates might bring investors who had been holding their savings in cash back to the market.