When a non-descript article, which can be easily ignored, is actually a wake-up call to investors everywhere.
The FT interviewed a Swiss Private Banker. Eric Syz. The bank, which has assets under management of SFr27.4bn, is at a turning point. After making its name as a private bank specialising in high-performing asset management — a feature that marked it out from other Swiss banks at the time which relied heavily on tax and banking secrecy — its fund unit has suffered years of poor performance and declining assets.
Private banks are grappling with rising costs and weaker margins. In the case of Syz, they are looking to private equity. So what does that tell you as a retail investor? Asset managers are struggling to find ways to generate enough returns for their investors and still make a margin themselves. Syz has realised that they are better focusing on private equity.
Is this something you should think about?
In the interview, “he says it is harder today to generate consistent good returns. Ultra-low interest rates and the growing efficiency of markets have deterred managers from taking high-conviction bets. “The risk of diverging too much from the index is so large that 80 per cent of active managers are forced to be index huggers,” he says referring to those active funds that typically perform like and track an index.”
He is saying that active managers, which is where most people allocate their capital, are setting themselves up for long term failure when using big asset and wealth managers. Investors are paying for outperformance that is almost impossible to achieve.
The article explains that Eric Syz family also invest their own capital into private equity. So why don’t you think about taking more control over how you invest?
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