Reply to FT Adviser
Posted by Robin Powell on June 6, 2016
The Evidence-Based Investor
Editor, FT Adviser
6th June 2016
I write in response to your article “Hounded by Twitter”, published 1st June, whose author complains of being “hounded” for his views on active fund management. I was singled out as one of those responsible.
Although I can’t speak for everyone involved, the Twitter exchange he refers to was, in fact, polite and respectful. It’s there for everyone to read, and I don’t think any objective observer would consider your correspondent to have been hounded at all.
It is regrettable that, in turning this into a personal matter, FT Adviser has failed to address the important issue I raised in the article which appears to have so riled your colleague — namely the inherent conflicts of interest in investment journalism.
Your comment piece refers to me as an “ardent support of passives”, but this isn’t about active versus passive at all. It’s about delivering the best possible outcome for the person who really matters — the end investor.
The fact is that the heavily marketed, high-fee funds most commonly touted by the media over the last few decades have served investors extremely poorly. Data produced by the likes of S&P Dow Jones and Morningstar shows us time and again that funds like these have consistently failed to beat their benchmarks over any meaningful period of time.
Research by Cass Business School has concluded that “the vast majority of UK fund managers are genuinely unskilled”, that only a tiny number deliver long-term outperformance, and that even those who do so recoup for themselves any value they add in the form of fees. That hardly strikes me, to quote your correspondent, of “an example of an industry that has put the Great in Great Britain”.
As a journalist myself, I believe passionately in the potential for journalism to be a force for good, and we have some excellent investment journalists in this country. But far too much of what investors read in the media is actually harmful. It points them towards products that are laden with fees and charges, many of them hidden, which will seriously erode their returns over time. Also, with its constant focus on market movements, the media encourages investors to act when, in most cases, they would be better off leaving their portfolios exactly as they are.
The issue of editorial independence is a very sensitive one for us journalists, but it’s one we must never duck. The fund industry spends a fortune on advertising, public relations, lobbying and corporate hospitality (not least for journalists); to suggest, as your article does, that none of this impacts in any way on editorial coverage is simply just not credible.
For all of us who want to see better outcomes for consumers (and I’m sure, by the way, your correspondent does) this is a debate we need to be having.