The Making of Billion Pound Managing Fund Managers and Why Your Pension Investments Underperform

I’ve been speaking to a lot of people in their 40s to 60s and over this week concerned about their pensions. What worries me is what they are investing in. It’s not that they have put their money into esoteric ostrich farms or such like.

Rather many have entrusted it to fund managers. Now speaking as a hedge fund manager (no we do not manage retail client monies only institutional funds), we do consider ourselves the SAS of the fund management business and more than happy to look down upon our ‘long only’ retail fund manager colleagues.

Don’t get me wrong, I like some of them, my secretary I trained up and she now manages a billion pounds at Newton Asset Management – so I know I can make people billion pound fund managers.

What worries me, and I’ve written about this in the Financial Times and my books is that the long only fund managers advertise like crazy, pull in your money, shove it into the handful of companies so much money can buy shares in without owning the business outright, eg BP, Aviva, United Utilities, and then tell you to hold for 5 years and charge on £10k, 10% fees over that time.

Most private investors don’t know they can see what the top holdings of such a fund are. And if they saw it, they would know they can go to Halifax or Barclays online and buy it the stock themselves.

But that’s not all. This is impacting pensions. It means you will have thousands less in your pension.

The problem is made worse with titles like UK Equity Growth Fund. Hmmm…so much growth – negative over 3 years – thanks! UK only funds should be banned.

By excluding UK investors from overseas companies they are forcing poor growth on them.

So if someone put a gun to my head (my greying hair as someone pointed out in one of my investment webinars) and said what one stock should I buy for my child for 20 years – I would say, in an ISA so it’s tax free gains – buy – wait, I’ll tell you in a second. Why? Because names I’ve been giving for 20 years and the ‘obvious’ ones people ignore and then keep coming back to me saying ‘but it’s too late now, gone up too much’ whilst they go into a lesser known one to blow up their monies.

The one – the single one? Pensions need safety and growth. Fund managers are getting away with delivering neither.

I can make anyone a billion pound managing fund manager, as I proved with Naomi – PA, English Language student, opera singer. But they just need to listen. She did.

Alpesh Patel