PA ANALYSIS: Where are all the risk takers?

Added 10th June 2016

Outcome-based investing is the investment structure of the decade and is predicated on maximising risk management first and eeking out returns second.

PA ANALYSIS: Where are all the risk takers?

Over a glass or two last week, a learned colleague slipped into one about whether or not investment managers were once again “feeding the machine of mediocrity”?

The emphasis for the past few years has been on outcome-based investing, with the outcome at a client level usually being a particular income target, or a specific growth yield around an event, with that event being anything from retirement in 40 years’ time for another 30 years, to an education in 15 years for a further 10 years, a wedding in five years (for who knows how long…) to a holiday next year.

Then there are the more recent additions of having to pay off a student loan and helping your kids with a deposit for a house. Love ’em, but you don’t want them living with you forever.

So what about the outcome investors really want - considerably more money tomorrow than they have today?

Investors want returns; the industry is providing caution and protection. Even cautious investors want close to double digits every year; the industry is aiming for 3-4% every year.

"Up to 50% of the cash an investor hands over disappears in fees that are hardly deserved by the fund manager"

The industry is also working in a world where the risk-free rate is 0.5% and the average cautious fund (using the IA Mixed Investment 20%/60% Shares category as a proxy) has provided -1.6% returns in the past year rather than the 3-4% investors should expect. If you add charges on to these figures then up to 50% of the cash an investor hands over disappears in fees that are hardly deserved by the fund manager.

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About Author

Gary Corcoran


Portfolio Adviser & International Adviser

Gary Corcoran is the editorial director for Portfolio Adviser, International Adviser and Fund Selector Asia. He is also programme director and chairman for events hosted across the UK, South Africa, Middle East and Asia. Gary joined Last Word Media in August 2006 as the launch editor of Portfolio Adviser, having previously worked at Bacon & Woodrow, Legal & General, FT Business and MSM International.



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