Former AllianceBernstein chief on why fund management model is broken.
Peter Kraus, once a highly paid Wall Street executive, says performance not scale must be industry’s focus. Siobhan Riding writes in the FT, about Peter Kraus.
The 67-year-old, who made his name on Wall Street when he served as co-head of Goldman Sachs’ asset management business, centred the business around his belief that active management in its current form is broken and needs to be reinvented.
The article in the FT has some interesting points.
“The revenue model in asset management is built for scale, not for performance,” says Mr Kraus.
Agreed (me)
“Last year managers may not have performed but their assets still went up, so they were paid more. That’s ridiculous for the investor”
Agreed again (me)
“He forecasts that the end of the 11-year bull run will prompt a day of reckoning for underperforming asset managers, who will see assets fall at a quicker rate than they are able to cut costs. “[The crisis] is going to shake up the traditional industry and force management to make decisions they haven’t had to make before.”
Agreed yet again (me, again)
says Mr Kraus. “It meant changing the value proposition from ‘pay me whether I perform or not’ to ‘pay me if I perform’.”
Agreed again and again (me again)
Its time for all investors to “take up arms against a sea of troubles, and by opposing end them” Every investor needs to rethink how they invest.
Be curious. Be interested. Be open-minded. Be empowered. Want a conversation?
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