The first batch of assessment of value (AoV) reports from asset managers have appeared on our desks from Hargreaves Lansdown, Vanguard and Rathbones.
The FCA’s has ‘concerns that retail investors may be getting poor value for money’ and has chosen several assessment criteria for funds – including performance, fund costs, economies of scale (and the whether they are passed on) etc.
What and who are AoV reports for? It seems improbable that retail investors will seek them out, or regard them as particularly useful when they do. Advisers and portfolio managers might glean something useful from them, and media commentators will have the occasional look.
Their main purpose is to concentrate the minds of asset managers and their boards on what providing value means and take some action to provide more of it. The regulator thinks the asset management industry makes super profits that cannot always be justified and these reports are the first line of defence against that.
It remains to be seen how the FCA will assess whether value has been offered in cases of underperformance against ‘realistic benchmarks’. Of course, half the market will fall below the sector average.
In terms of readability and coherence, we think that Vanguard is the report that others should emulate. It is much shorter and an easier and more helpful read – although we feel it is reassuring rather than informative for investors. Of course, it is easier to evidence the value of a low cost proposition such as Vanguard’s.
The Rathbones document was a much tougher read. Individual funds were each described separately under the various criteria in a repetitive way. Typical of this is the section on ‘comparative costs’ of funds where most of the fund summary descriptions were more or less identical with any mention of poor performance tucked away discretely. Unlike Vanguard, there was no helpful summary table.
Maybe these documents will help in the long war to bring down asset manager charges or at least provide better value for retail investors. But the important audience will be at the FCA – not the end investor.