Liontrust CEO: Fund firms can help bridge savings gap

Liontrust CEO: Fund firms can help bridge savings gap

Good active management could play a "vital role" in reducing the "huge savings shortfall" worldwide if active managers explained their benefit to investors, a fund house CEO has claimed.

John Ions, chief executive at Liontrust, told FTAdviser there was a global need for people to save for their future and to be helped in achieving their financial objectives, and that good active management could play an important part in plugging the current savings gap.

But active managers could only do this if they explained to investors how active management could benefit their portfolios, Mr Ions added. He said these benefits include the ability to "exploit market inefficiencies" and "manage volatility" in a way that passives can not.

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Passive funds have dominated inflows in the investment world over the past few years as advisers have felt cost pressures and have tried to keep their clients' fees down. As passive funds take less ‘management’, the fee charged by the manager is typically less than that charged by active funds making them a cheaper alternative for the investor.

On top of this, markets have risen solidly for the past decade, aiding passives' rise to favour. Active funds, by contrast, are expected by many to 'come into their own' when markets begin to decline.

In order to connect with investors active managers also need to "embrace technology" to personalise their service, according to Mr Ions.

He expects both current and future investors to demand "accessible" information as well as a "bigger say" in their investments.

Mr Ions added that fund managers needed to clearly explain and document their investment processes, which in his view should be "repeatable" and "scalable".

He said: "The past year has reiterated it is essential that people have confidence in those who invest money on their behalf through fund managers meeting client expectations.

"While performance is not predictable, the way in which funds are managed should be. This gives clients and investors reassurance that funds will be managed the way they expect them to be."

This was an issue that was highlighted earlier this year during the Neil Woodford debacle. Many market participants believed that Mr Woodford's investment style at his own business, Woodford IM, had drifted away from his old focus on large-cap defensives.

Mr Woodford had to suspend his fund in June 3 when he could not meet requested redemptions due to the level of illiquid assets in the fund.

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