Free advisory services and research
have replaced golf games and game
tickets as the “goodies” of asset
management, reports Kip McDaniel—
but just how valuable are they?
It’s a mid-winter Friday at a large corporate
pension headquarters, and the weekend is at
hand. The week just passed saw a substantial
market sell-off, and one of the fund’s external
managers, with an enhanced index mandate, has
sent through performance numbers that do not
appear to add up. The fund has notified its global
custodian, and the manager has been alerted.
No party, however, other than the plan sponsor,
seems notably exercised—the fund consultant,
unsurprisingly, sees this as outside his bailiwick,
and no one’s rushing to help the plan resolve
what could be a real problem.
NoN- INvestMeNt alpha
are you
In this case, the plan sponsor found a solution in
a different place—with its largest asset manager
relationship. That manager declared itself willing
and able to analyze the errant asset manager’s
trades, and on a weekend, too. Twenty-four hours
later, the plan sponsor had his fears confirmed—
the enhanced indexer had exceeded its mandate
and lost big, turning what was supposed to
be a conservative portfolio into a risky one.
Straightaway, the plan began the arduous task of
unwinding the mandate, armed with exactly the
necessary analysis. The fee for this expertise and
data crunching?
Free. FINDING aNy?
Is this the future of asset management, with
large firms offering free services that crowd out
both smaller asset managers and independent
consultants? Or is this just a trick of the day, the
Art by James Yang / jamesyang.com
