US funds more profitable than UK counterparts
US mutual fund profits are on the rise due to tighter controls over administrative costs ac-cording to PricewaterhouseCoopers.
US mutual fund profits are on the rise due to tighter controls over administrative costs ac-cording to PricewaterhouseCoopers.
However, UK and Irish funds are suffering from a profit squeeze driven by increases in adver-tising and technology-related expenditures and lower fee structures.
According to the Bloomberg wire service, a survey by the accounting group of 32 UK and Irish funds reveals profit margins fell last year by 4 per cent to an average of 29 per cent while costs rose 30 per cent. In contrast, the 89 surveyed US fund companies returned an average profit margin last year over 34 per cent.
One of the big winners in the US was Alliance Capital which reported a profit margin growth of 36.3 per cent from 33.8 per cent, strengthened by strong returns of 45 per cent in the three months to September.
The survey found that UK investment managers were unable to convert market buoyancy and strong revenues into increased profits due to less attention to back office expenses compared with their US rivals.
Fees were also another area where the UK funds lost ground and range from 0.1 per cent to 0.4 per cent, depending on the investment, while fees in the US on comparable funds are two to three times higher.
The popularity of index funds, which mimic benchmarks such as the Standard & Poor's 500 Index in the U.S. and the FT-SE 250 Index in Britain, is cited as one reason for the profit mar-gin decline among U.K. fund managers.
Recommended for you
In this episode of Relative Return, host Maja Garaca Djurdjevic is joined by shadow treasurer Angus Taylor to discuss the current state of the financial advice sector, the economy, the housing affordability crisis and more.
In this episode of Relative Return, host Laura Dew speaks with Andrew Mitchell, director and senior portfolio manager at Ophir Asset Management, about why he loves working in fund management and the lessons he’s learnt in a decade of running a firm.
In this episode of Relative Return, host Laura Dew speaks with Blackwattle Investment Partners managing director and chief investment officer, Michael Skinner, about setting up an asset manager and what he looks for in an investment team.
In this special episode of Relative Return, Momentum Media’s Phil Tarrant and Jordan Coleman discuss the publishing house’s expansion into greater coverage of the wealth management space.
