Alliance Bernstein: Active management has become ‘too big’


AllianceBernstein chief executive Peter Kraus has argued the asset management industry has “hurt itself by growing too big” and warns the size of fund groups is weighing on active returns.

In an interview with the Financial Times, Kraus says “a scale problem” exists within asset management.

He says when mutual funds reach a certain size “the incentives shift from trying to outperform your benchmark to not wanting to underperform. Our advice to the industry is to constrain ourselves. We are hurting ourselves by growing too big.”

In 2014, AllianceBernstein closed its Select US Equity fund when it hit its $15bn capacity, and last year closed its $1.5bn European Opportunities Fund to new business.

Kraus argues while the number of US mutual funds has more than doubled over the past 20 years, the number of talented managers has not grown at the same pace.

He adds: “There is probably too much money in the world today for active, so we probably need passive . . . But people are making the illogical leap that they should put all their money into passive. If people realised the risks around ETFs the behaviour would be much more moderate.”