STEPHEN CRANSTON: On the (smart) money
Active managers are now being attacked on two fronts: by vanilla index funds and smart beta
Are SA fund managers still living in a cosy, complacent world? After going to an investment conference hosted by Sanlam, I certainly felt that they were. After all, they do not have to worry about Vanguard, the giant low-cost asset manager. Because of its vast scale it can charge as little as seven basis points (that’s 0.07%, not 0.7%) on something vanilla, like an S&P 500 tracker, and still be highly profitable. In the UK, Vanguard charges 0.3% all in, including advice and investment platform charges. In SA there is never going to be a big enough investor base to be profitable on just seven basis points. The Vanguard pretenders, like 10X and Sygnia, talk in the 0.4% to 0.7% range, but even then it isn’t clear whether everything is included.
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