The world's biggest fund managers were this week accused of arrogance, complacency, mismanagement and incompetence in a devastating report by one of the most powerful management consultancies.
KPMG, in partnership with Create, a UK-based think-tank, points the finger at a generation of fund managers who squandered the opportunities of one of the greatest bull markets, let down investors and brought their companies to the brink of ruin.
"This is a business which... was only sustainable because the markets were powering ahead with seemingly unstoppable momentum," said Mr David Ledster, KPMG's global head of investment management and funds.
The report, the largest study of the global fund management industry, is based on interviews with senior executives at 185 firms, controlling a total of $19,000 billion (€16,440 billion) of assets under management. It was unveiled this week at the industry's annual summit - the Funds Forum in Nice - where the chief executives of some of the world's leading firms were quizzed on the future of the business.
The interviews - called "post mortems" in the report - were conducted privately and anonymously. So worried were some fund managers that they would face reprisals from their bosses that they only agreed to speak on condition that they would never be identified. But, said Mr Amin Rajan, chief executive of Create, they were determined to "get the message out" in order to relaunch the industry on the right path. The result is a picture of an industry that - three years into the worst bear market of its history - has not yet woken up to the magnitude of its failings.
The report attacks the race for assets under management, which became "a virility symbol to the detriment of profits". It points to a "leadership vacuum", which emerged because of the rise of the "gifted amateur" - picked for his investment rather than his management skills.
It presents an image of an industry peopled by "inflated egos". Even when they underperformed - or were beaten by the index-tracking specialists - they continued to charge high fees and surreptitiously hugged the indexes.
Some of the worst criticisms come from within the industry, especially those linked to banks and insurance companies. Just 20 per cent of the firms in the survey have made cost cuts in excess of 20 per cent. Some 60 per cent of firms have made cuts of up to 20 per cent. Another fifth of the firms have not made any cuts at all. - (Financial Times Service)
