Fund managers should focus on what their customers want

An interesting titbit in the FT yesterday. We are increasingly trading funds in the same way as shares. The average holding time for a fund in the US is six years. In Europe it is a mere two years and this period, says, Diana MacKay “is rapidly contracting” as “client turnover in funds is getting faster.”

This matters for the simple reason that it is really tough for fund managers (who appear to find their job remarkably tricky as it is) to “efficiently manage unstable pools of money”.

So what do they do? The usual answer, says MacKay, is to say “education”. I’ll come back to this in another post, but I think she and I agree that it is an idiotic answer (you can’t educate people on a subject they have no interest in, however hard you try).

Instead, she says, if fund managers across the UK and Europe want to “build persistence in their products” they need to create products that will appeal to the people who really want to be sticky – “ordinary investors who want to save variable amounts of money for various objectives over his or her lifetime.” That’ll be me and you.

This is exactly the point I was trying to make in my own article on the matter at the weekend. Mackay suggests that it is something of a “daunting challenge” for the industry. That may be so, but if it is, it is only because the things that we want are things that the industry is terrified of – simplicity and pricing transparency.

Here, I suggest a couple of funds that fit the bill.