James Coney  

Restore faith in the investment sector

James Coney

James Coney

There is a group of financial journalists out there – call them equity virgins – that actually does not believe in investments.

It is cash all the way for them. The pervading view being that investing is just a massive racket run by the industry.

You can see why they would come to that conclusion. So many funds underperform, the fees are still far from transparent, and the wealth in the industry so great that you can wonder whose benefit the whole thing is for.

Then there are those that are total converts to the cause, who unquestioningly follow the star stock pickers and hang on every single move they make.

And there are those who do not like active managers at all, and think the future lies in portfolios of low-cost exchange traded funds. This has proven to be a fine strategy in our 10-year bull run – let us see how it lasts when that ends.

And then there is the final group, for those like me, who believe in the ability for well-run actively managed funds to create value, but who think the entire industry is ripe for change.

But I also believe that total transparency should extend to full stock selections.

Over here, the only requirement on fund management companies is that lists of full holdings are published once a year.

They do not even need to be that recent when they do publish, so when I looked last week, the most recent list of holdings for one of Britain’s most popular funds was for August 2017 – it was 15 months out of date.

We all know what is included in fund fact sheets, and these are updated regularly – but that is just a snapshot of what really is going on in a fund.

How do we know what is actually happening? How do we know if the manager has not suddenly changed his style or asset allocation?

This might not be evident in the headline figures or performance for some time.

The argument against publishing regularly is that these are commercially sensitive decisions being made. But that is hokum.

Everyone in the industry knows what is going on, it is just the public that is being kept in the dark. And in the US they publish full lists of holdings quarterly – that should be the minimum requirement here.

Of course there is an exception, and that is Neil Woodford, who publishes his full holdings once a month.

Now, you may argue that the level of scrutiny he gets is why the rest of the industry will never follow suit. I say it demonstrates precisely why they must. Not every fund generates the same level of interest as him, but plenty will. We have had a 10-year bull run.