Fund selection skill is set to play a much more decisive role for researchers in the funds management sector, according to Van Eyk managing director Stephen Van Eyk.
“There’s going to be a huge dispersion of fund manager returns, which will make it a lot easier for advisers to determine if we are adding value.
“They are going to be asking a lot more questions of us, which in turn is going to require a lot more skill from us in the role we play in future.”
Speaking at the Perennial conference Invest09 last week, Van Eyk said it had been previously been quite difficult to demonstrate added value through the selection and rating of funds.
“Let’s face it, we’ve all benefitted from the stock market doing 17 per cent per annum over the last seven or eight years.
“Nobody was really going to kill you if you picked the worst fund manager, and the best manager was doing 19 per cent and the worst 17.”
However, Van Eyk said that scenario would “dramatically change in future, with much lower beta driving in a wide dispersion of returns”.
“I think the performance difference between the top quartile and the bottom quartile will be enormous over the next two or three years.”
“(A manager could be) making 8 per cent or 9 per cent from a portfolio and be adding plus 3 or minus 3 or minus 4.”
He added that “opportunities for managers to make money (in a low beta era) will be enormous, although, again, it doesn’t mean they will make money”.
“So, the pressure is going to be on the researchers to get a reasonable strike rate on those ones that do.”
