Cable challenges City to think long term
It seems that the Government has produced some research that endorses what many advisers have known for some time. That investing needs to have a long-term horizon to work properly. Diversification is really important to successful investing and if you are determined to use an active Fund Manager, make sure that they have a process that enables them to deliver the outperformance (alpha) rather than simply hug a benchmark and watch rivals, so that they are not out of step with their peers which is short-termism at its worst or perhaps most timid.
Last year Vince Cable, the Business Secretary (at the time of writing this blog) commissioned a review – The Kay Review of UK Equity Markets and Long-Term Decision Making. The 133 page report has now been published and will doubtless add further fuel to fire surrounding the issue of what Fund Managers charge for and how do they get away with it.
I appreciate that it takes a Government report to generally weigh this information properly (and I’m guessing that this won’t be the last one). However anyone that visits the City of London, New York or any other major financial centre, will appreciate that despite the expensive land price, there is an awful lot of room given over to a marble-floored foyer. It should be no surprise that this has a price tag which needs paying for.
I’m all for a smart office, particularly when I have to work in it, but I do remember one very successful Fund Manager that used to run a “special situations” (i.e. undervalued) type of fund say to me that he would apply some very early filters to his process. On a visit to a company, if the car park was full or cars with personalised number plates he wouldn’t even enter the building. If he found a fountain in the foyer he would turn around and leave. It served him rather well, because he knew that sometimes the ego is simply too big to accept necessary change.