Nucleus: £100m overspent due to manager skill/cost variance


Investors are overpaying by as much as £100m a year per platform due to disparity of fund manager skill, according to Nucleus.

Welcoming the FCA’s market study MS15/2.2, chief executive David Ferguson says it is “way bigger” than the RDR, which pales in comparison.

Speaking at the platform’s annual conference, Ferguson said: “If [the asset management market study] plays out as the FCA intends – and we think it will – fund managers will have to bear the sharp end of the pressures on fees.”

He calls into question the fact that asset allocation often drives the bulk of investment returns yet active management costs so much more than passive.

Ferguson also claims not a single multi-asset fund has outperformed its equivalent Vanguard Life Strategies over multiple timeframes.

He says: “In 2014 we said the asset management sector was oversupplied, overpriced, underperforming and under attack from all sides.

“We said the regulatory examination of fee transparency and commercial pressure from index funds would help drive a collapse in fees pretty much all across the board.

“The great big 30-year party was over and the hangover kicks in.

“With the publication of MS15/2.2, this got pretty real.”

Neither advisers nor clients benefit from their “supposedly advantageous” collective buying power, he says, while retail funds also cost about four times as much as the institutional equivalent.

Ferguson also notes a huge spread between the intellectual property, or talent, of fund management and its cost.

He says Nucleus clients are overpaying by as much as £100m every year across the Nucleus wrap alone.