Eight years after the collapse of Lehman Brothers' triggered the global financial collapse, fund managers reveal the biggest lessons learned and those which remain on the horizon and are continuing to threaten the asset management industry.
Nick Wilson, chairman, Qatar Investment fund
Survival of the fittest
The Lehman's collapse and the financial crisis was an overdue reminder of the vital importance of ensuring clients understood where and how their savings are being invested. And a very stern an important lesson this was for everyone managing someone else's money.
No longer do we have AAA rated asset and mortgage backed securities, generating little more than deposit rates of return but harbouring huge risks. Transparency has likewise opened up fee structures.
Clients can easily choose how to invest their hard earned (and taxed) savings and what to pay. The investor can choose which structure and price they want, and pay for investment skill they select.
Where price and skill have not lined up, that part of the industry has shrunk, as we have seen in hedge funds. But demand for lower cost ETFs that track international, country or sector indices has burgeoned.
Corrosive effect
We have seen a protracted race to the bottom in interest rates. It makes mortgage payers feel richer. But it is having a corrosive effect on the income of pensioners and those who rely on bond coupons and deposit interest. The industry has responded by searching further afield for returns.
This has been geographic, with the growth of frontier market funds and single country funds, demographic funds investing in demand from ageing consumers, or products that align with investor preference where they wish their savings invested. Green and ESG funds and overlays for mainstream funds, are now common.
The industry is now more transparent, competitive, and varied. Despite the problem of poor performing investment products that endure for years, the asset management business is one that is essentially Darwinian: firms are born, grow, shrink and die every day.
That, helped by sensible regulation, will ensure that talent prospers by serving investors well, and also does what any economy needs - allocates capital to the best users of that capital, and starves the inefficient.
