Investors snow scrutinise the proposals a lot more. We’re quite mindful that the environment for certain investments will be quite attractive, but what we don’t want is another round of hedge fund-type of fees for things that are more straight forward. Quant managers have done it a lot – coming up with their own special extra super you-beaut product which they want to charge twice as much for, rather than enhancing the existing product. Greg Bright: Ross, your clients have on average a lot of unlisted assets, a lot of performance-related fees. Are fees now more important and would that actually impact on your asset allocation?

Ross Blakers: We are mindful of fees, we always have been. We do like quant because it is much cheaper than other forms of active management. We do have a preference for base plus performance fee. One important thing here is that it’s not just the after-fees return that matters, but also the after-tax return. A key focus of ours is to make sure that the manager’s interests are aligned with the super fund members’ and that is the after-tax after-fees return which is credited in their account.

The quant managers are at varying levels of sophistication in tax management. We work very actively with the quant managers that we utilise to make sure that not only things like franking credits but also capital gains tax considerations are taken into account in their investment process. So that they’re getting the best outcomes for the members. Greg Bright: What about trading off lock ups to give the manager, say, a three year contract in return for lower fees?

Kristian Fok: There’s a problem there because things change with people and personnel. James Gruver: But we have seen clients requesting annual fee caps with any excess fees earned rolling over to the next year too… If you’re willing to back yourself with a performance fee you are likely to seek additional reward for the additional risk however the reward probably should not be unlimited. market.


Leave a comment