In an interview with the FT, Mr Hailer declares his intention to focus on the problems in the fund industry, notably the so-called closet tracking and the broader issue of whether asset managers do a good job for investors. The Bostonian is angry about closet tracking, a form of mis-selling where a fund charges high fee akin to those paid for active management but in reality closely follows its benchmark.
“I think it’s horrible. It is ridiculous. If you are going to be close to an index, then don’t charge a [high] fee because you’re not adding value,” he says. “If you’re going to just mimic a benchmark because it’s good for your company, that is so wrong.”
During another interview at Natixis GAM’s London office, Mr Hailer says he does not have an opinion about fund houses “getting named and all that stuff”. But regulators do need to challenge those guilty of closet tracking, he adds. (see BETTER FINANCE article in the FT on the naming and shaming of Closet Index Trackers)
Mr Hailer is not afraid to criticise the fund industry, where he believes “there is an amazing amount of opportunity for improvement” when it comes to treating investors well. Most fund houses might not be guilty of closet tracking, but many are guilty of pushing unsuitable products on investors, Mr Hailer claims.
The chief executive also says: “Our industry has always been geared towards, ‘Let’s sell a product, let’s make the money, we’ll worry about tomorrow when tomorrow comes’. “We chase what the fad is for a product. Look how many companies have now come up with ETFs. Why are they in this? Is it to give clients a better opportunity to build a portfolio or is it to gather more assets? There is a big difference between the two.”
“There are a lot of companies that are still hoping for a hot product and not understanding why that product should even be in a portfolio,” he adds.
Please read the full article from the Financial Times here.