“I think that’s a challenge for all asset managers at the moment.”
Another difficulty is how to communicate to clients who may be holding funds for varying amounts of time.
Matcham said M&G considers itself a long-term investor, and hopes that clients hold its funds for three to five years and beyond.
“It can be frustrating to be honest, as you have to have the [short-term] performance to get interest, but you have to respect that there are funds in our stable that have done well over five years or from tenure.”
In its most recent assessment of value, M&G Investments flagged two of its funds as not delivering value to customers, the M&G Absolute Return Bond fund, and the M&G Recovery fund.
The first fund underperfrmed its benchmark by around 1.5 percentage points in the five years to the end of March this year, and the second underperformed by around 5 percentage points.
The bond fund is subject to an ongoing review, however the company said while the recovery fund has not delivered value to investors, it believes it still provides them with benefits from its economy of scale and lower charges than most competitors.
The end for the UK?
One trend Matcham is picking up is the start of an anti-UK sentiment among investors, which isn’t specific to M&G.
He said clients have been speaking about the role of UK equities within a portfolio, which is shifting in favour of a more global approach.
UK equities have been out of favour for years, with net outflows from the funds hitting £1.3bn in September alone, as volatility tore through the home market after the “mini” Budget.
Larger wealth manager clients are moving from the Wealth Management Association’s benchmarks to MSCI’s, which in practice is moving from a 25 per cent exposure to UK equities to a 5 per cent exposure, he said.
“It’s not every client, but to me the question is, what is the role of UK equities in a portfolio?”
Other challenges Matcham sees in the future are the task of demonstrating the benefit of active management over passive, and the changing face of wealth management.
This will mainly be how wealth managers deal with the intergenerational wealth transfer.
“How do [younger clients] want to view their statements? How do they want to interact? What are their sustainability preferences?
"The wealth business models are going to have to change massively."
sally.hickey@ft.com
