Stop sending us out-of-date products, says fund selector

Provision of a small number of high-quality products is preferable to a mass of similar funds, speakers tell AsianInvestor's Fund Selector Forum. And they say managers need to prove their funds' worth.
Stop sending us out-of-date products, says fund selector

Fund managers have been accused of continuing to bring products late to the market, despite complaints from fund selectors in the past.

Fund selectors say that instead of a flood of me-too products, what they are looking for is a smaller number of high-quality products.

At AsianInvestor’s Fund Selector Forum in Singapore last week, Deutsche Asset and Wealth Management’s fund selector told managers: “don't try to sell me a product just because you need to launch a product.”

Karen Tan, head of global wealth solutions for Asia ex-Japan at Deutsche AWM, cited high-yield bond funds as a recent example of managers' lack of imagination.

“The mutual fund long-only business is very commoditised. I can understand from an asset manager standpoint why you want to set up a certain fund strategy, but coming out with a high-yield bond fund after the market has gone really isn’t good business sense. You should have come to me two years ago if you wanted to do that,” Tan told the forum.

“We’ve been on that train and we’re more than happy to get off. You’ve got to be practical and get your pulse on what your clients need now,” she added.

While the Asian high-yield bond fund market still has some distance to go, Tan said she doesn’t need to onboard a new product just to go the distance.

“We’ve got enough. It’s also about cannibalisation. If we have 10 funds in one strategy, everyone will get very little. What you want is to have enough demand to sustain the 2-3 best ideas in that space,” she said.

Tan was one of the panellists at the AI forum discussing how to best service fund selectors. Her response was simple and direct. Managers should make life easier for fund selectors by providing clear evidence of how good their funds are. Tan said she preferred to spend more time on the qualitative side to decide which manager has the edge.

“If a manager shows me a new strategy or a strategy that is competitive in the market, it’s very simple,” she said. “Do the analysis for me from the quantitative side. They have got to work and prove themselves, rather than me having to dig across 10 fund houses to figure it out.

“The number crunching is the plain vanilla stuff. So if you want me to take a look at this product, make it easy for me.” 

Meanwhile, Roger Steel, president of new markets and business development at Sun Life Financial Asia, said fund managers must also make it easy for relationship managers and financial advisers.

He said "the elephant in the room" is the low-cost passive option, the ETF. "You really need to show why your offer is better than passive; how you got alpha in the past and how you are going to get alpha in the future,” said Steel.

“I would ask managers to provide information that is ready for distributors and for advisers. If you come in with all the attribution analysis and graphs, that is great for the guys doing the due diligence. But in the hands of the person advising the customers, it is just confusing.

“What you need to do is show that you are really good in a definable way, otherwise you will see more and more flows into passive," he warned.

Chandrima Das, head of fund solutions at Bank of Singapore, advised fund houses to get their portfolio managers to Asia, and not just their sales people, to educate the distribution networks.

Wong Sui Jau, regional research director at fund platform provider iFast, promoted the concept of open architecture and highlighted the importance of providing content and engagement so investors are kept abreast of what’s happening in the market.

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