“The current opportunity appears to be great but investors should be patient. Be patient or be passive,” she said. Ross Barry, of Watson Wyatt, said that the industry was on the cusp of becoming a buyer-dominated market. “We’re on the verge of another wave of reductions in fees,” he said. “I think fees are still too high, especially in some sectors of the market.” Barry said that of the agency issues that funds had with their service providers, such as the “sales machines” of larger funds management firms, asset consultants possibly represented a bigger issue.
“It’s important to challenge your consultant on how active risk should be taken around the portfolio.” John Moore, of Russell Investment Group, emphasised more effective implementation of active management decisions as a way to add extra alpha. He said there were four main areas funds could save money through better implementation: reducing turnover through emulation strategies and reducing taxation through propagation, which could save 30-50bps in shares; audit and control the “opaque” pricing of foreign exchange dealings, which could save 6-18bps; the use of professional transition managers who could save a market impact of 60-180bps per event; and more efficient rebalancing within reduced bands, which could add 10- 20bps a year at the fund level.