The majority of Australian active managers might be charging fees that are too high and smart beta investments strategies will continue to disrupt the active management, according to VanEck’s analysis.
The report, entitled “When are fees too high? The potential impact of smart beta to disrupt active Australian equity strategies”, claimed that most Australian equity funds should be charging between 0.35 per cent and 0.65 per cent per annum, as most of their performance could be explained by factors which were also used in smart beta strategies.
“Only those active managers who can demonstrate identifiable and persistent ‘real alpha’ will prevail,” Russel Chesler, VanEck’s director – investments, said.
“Australian equity managers that continue to offer benchmark-like performance for high fees face some hard decisions. They must evolve to survive.”
According to Chesler, active managers needed to better differentiate themselves and provide what smart beta could not.
“Of this differentiation can’t be achieved, the investors will continue to question the fees they are being charged,” he concluded.