c A p I tA l M A R k e t s
A triumph of hope
ThE EFFECTs of the global financial and economic l the median manager has beaten the market
crisis continue to spread, causing a loss of confidence average return in most years over the past decade.
in the level of skill in the investment management
Investors expect their managers to perform much
industry. Investors are now deeply questioning why
better than this, especially in bear markets. Indeed,
they have been paying high fees in return for recent
many investment managers may not survive the
poor investment performances.
current intensity of investor disappointment and,
Figure 1 reveals the extent of current investor
almost all of those who do, will have had to radically
anguish, at least for those investing in international
alter their ‘value proposition’ to clients, including
equities. It shows that:
making dramatic fee reductions.
l in the calendar year 2008, the market average
return (of minus 25%) was a better outcome A longer-term perspective
than that achieved by the ‘median manager’ and, Were investor expectations prior to this latest crisis
therefore, more than half the surveyed universe based on a deep understanding of the long-run
of like managers; and performances of funds managers who claim to
have investment skill?
hugh DoughErTy is the Head of Investment Manager Research for
Watson Wyatt Australia.
40 INFINANCE march 2009 The magazine for Finsia members