Asset managers<\/strong> FOR decades looking after other people\u2019s money has been a lucrative business. Profit margins in the asset-management industry were 39% in 2014, according to BCG, a consultancy, compared with 8% in consumer goods and 20% in pharmaceuticals. The industry\u2019s global profits in 2014 were an estimated $102 billion, allowing firms to pay those picking stocks in the American equity market an average salary of around $690,000 a year. Better yet, asset-management is growing fast: the industry looks after $78 trillion worldwide, and could shepherd over $100 trillion by 2020.<\/p>\n Yet the outlook for many asset managers is grim. The industry is being reshaped by low-cost competition. At the same time falling markets are shrinking assets under management, and thus fees levied as a percentage of those assets. Regulators, meanwhile, are trying to prevent consumers from being sold inappropriate products, which are often the most lucrative. The biggest challenge confronts so-called active managers, who promise to earn returns that are higher than the market benchmark (the S&P 500, for example) by picking investments judiciously. Very few manage to do so: a study by Standard & Poor\u2019s, which compiles the S&P 500 index, among other things, found that 91% of active managers in emerging-market equities failed to beat the relevant index over ten years, and that 95% of active bond managers underperformed.<\/p>\n This is hardly surprising: the average manager is likely to do no better than the market, before fees. Once fees are subtracted, therefore, active managers are likely to underperform. Morningstar, a data provider, has found that high fees are indeed a predictor of underperformance.<\/p>\n Low blow <\/b><\/p>\n When markets are rising, clients may not notice the impact of fees, protecting asset managers\u2019 profits. But last year most markets were flat or lower. McKinsey, a consultancy, says profit margins and growth fell at the majority of American asset-management firms in 2015. Paul Smith of the CFA Institute, an association of investment advisers, says, \u201cNow the tide has gone out and the emperor has no clothes.\u201d<\/p>\n That may help explain some big recent withdrawals (see chart). Actively managed funds in America saw outflows of more than $100 billion last year, even as $400 billion flowed into \u201cpassive\u201d funds that aim simply to track an index, according to Morningstar. It did not help that resource-rich countries hit by falling commodity prices sold assets owned by their sovereign-wealth funds to compensate for lost revenue. Firms that specialise in emerging-market equities did especially badly, with Aberdeen suffering an outflow of 14% and Ashmore 19%.<\/p>\n Regulation and technology are adding to the challenges for incumbents. In the wake of the financial crisis, regulators focused on the banks. Now they are looking at asset managers, with everything from the transparency of their fees to the liquidity of their investments under the spotlight. In America, the Department of Labour plans to introduce rules later this year obliging most financial professionals to suggest investments that are not just \u201csuitable\u201d, as current regulation has it, but \u201cin the best interest\u201d of customers. That will make it difficult to recommend investments in funds which pay the advisers a commission. A similar reform took effect in Britain in 2013. Account statements will also tell customers how much they are paying in fees.<\/p>\n Such rules will have a big impact on business models. A greater number of wealthy investors will start choosing their own funds, which should benefit online retail platforms, predicts PricewaterhouseCoopers, an accountancy firm. Advisers will no longer have an incentive to push expensive products of dubious merit, which should boost low-cost products such as passive funds.<\/p>\n Meanwhile, institutional investors are reducing the number of managers they deal with. RPMI Railpen, a British pension fund, has gone from 20 external equity managers in 2013 to seven today. According to a survey by State Street, a financial-services group, four out of five pension funds plan to increase in-house asset management. Investors are also reconsidering their exposure to high-charging hedge-fund and private-equity managers. CALPERS, a big Californian pension fund, has dumped its hedge-fund managers. PGGM, which manages Dutch pension money, has halved what it pays for infrastructure investments since 2008, mostly by investing directly. Some pension funds are clubbing together to negotiate lower fees.<\/p>\n Technology also means that the strategies of active managers can be replicated at much lower cost. Take value managers, who claim to be able to beat the market by picking cheap shares. A computer program can comb the market for stocks that look cheap relative to their profits, asset values, or dividends; investors have no need to worry that the active manager might lose focus or change style. When it comes to choosing between asset markets, robo-advisers, using computer models, can help investors manage their wealth for a very low fee. Earlier this month Goldman Sachs, a big bank, became the latest big financial firm to buy one.<\/p>\n Fees for active equity funds are falling slowly, dropping by 4% for retail investors between 2012 and 2014, according to BCG. But the competition from passive managers is intense. Fees on passive equity funds for retail investors dropped by a fifth over the same period, as operating costs keep falling. As a percentage of assets, expenses at Vanguard, a specialist in tracker funds, now average 0.18% a year, a fifth of what they were in 1975.<\/p>\n Retail investors increasingly choose one-stop-shops, such as Vanguard. These investors are buying cheap exchange-traded funds (tracker funds that trade on the stockmarket) or all-in-one multi-asset funds (a mix of shares, bonds and other investments), rather than trusting equity specialists. Passive powerhouses like Vanguard and BlackRock, both of which also sell actively managed funds, are the main beneficiaries of the upheaval in the industry. In 2015 they captured almost half of the industry\u2019s net inflows. There is also hope for newcomers: in China, some tech firms have become asset managers, earning custom from their prominent and trusted brands. A fund launched by Alibaba in 2014 quickly raised $90 billion from more than 100m investors.<\/p>\n Some star active managers, such as Bridgewater, a hedge fund, will continue to win business. But those that do badly will see their assets wither further, as withdrawals compound poor returns. For investors, this is good news: the industry may finally start benefiting them as much as it does managers.<\/p>\n Apple Pay is actually useful.<\/strong><\/span><\/p>\n It’s on my iPhone in an app called Wallet. You hold it over the credit card machine, put your thumb on the home button and, bingo, you’ve paid. Saves time. Saves losing your credit card. In fact, saves carrying your credit card.<\/p>\n Start your own business. <\/strong><\/span>Your table wobbles. Bingo, a solution you can sell to every restaurant in the world! They’re called Shuv-Its. And they probably cost less than a penny to make. There are opportunities everywhere — even under restaurant tables.<\/p>\n What a brilliant idea.\u00a0 <\/strong><\/span>Albertsons is a local supermarket. <\/strong><\/span>Want to know where the kethcup is? They hand you a one-page paper directory:<\/p>\n Personally I think an iPhone app would be more useful. But paper works.<\/p>\n New meaning to mobile computing. <\/strong>Spied in a California parking lot: Eight year old little Johnny asked his mother the age-old question:<\/strong><\/span><\/p>\n “How did I get here?” Johnny looked puzzled and finally said, “So you’re telling me that there has been NO sex in this family for 200 years? No wonder everyone’s so grumpy around here.”<\/p>\n Europe is hurting economically. Now with the Paris and Belgium bombings, tourism is likely to suffer…. Further no good.<\/p>\n Read this:<\/p>\n WASHINGTON — Speaking by satellite feed to the American Israel Public Affairs Committee (AIPAC) conference this morning, Israeli Prime Minister Benjamin Netanyahu stressed that “the chain of attacks from Paris to San Bernardino to Istanbul to the Ivory Coast and now to Brussels, and the daily attacks in Israel, this is one continuous assault on all of us.<\/strong>“<\/p>\n “In all these cases, the terrorists have no resolvable grievances.<\/strong> It’s not as if we could offer them Brussels or Istanbul or California or even the West Bank. That won’t satisfy their grievances because what they seek is our utter destruction and their total domination.<\/strong> Their basic demand is that we should simply disappear,”<\/p>\n Netanyahu’s address to the group was scheduled long before twin blasts hit Zaventem airport in Brussels, followed by another explosion an hour later at\u00a0Maelbeek metro station. And long before the latest suicide bombing — this time in Lahore, Pakistan with a death toll of 69, and 341 people wounded.<\/p>\n Donald Trump gave an excellent speech to the same AIPAC conference. You can watch it here.<\/strong><\/a><\/p>\n <\/p>\n
\n The tide turns<\/strong>
\n Consumers are finally revolting against an outdated industry<\/strong><\/p>\n
\nIn this section<\/p>\n![\"GiantSuckingSound\"](\"https:\/\/www.technologyinvestor.com\/wp-content\/uploads\/2016\/03\/GiantSuckingSound.png\")
<\/a><\/p>\n<\/a><\/p>\n
\n<\/strong><\/span><\/p>\n<\/a> <\/a><\/p>\n<\/a><\/p>\n
\n<\/strong><\/span><\/span><\/p>\n<\/a><\/p>\n
\nHis mother told him, “God sent you.”
\n“And my Cousin Matt?”
\n“He sent him also” said the mother.
\n“Did God send you, too?” asked little Johnny.
\n“Yes, dear,” the mother replied.
\n“Did God send Dad, too?” asked little Johnny.
\n“Yes, dear,” the mother replied.
\n“What about Grandma and Grandpa?” Johnny persisted.
\n“He sent them also” the mother said.
\n“Did He send their parents, too?” little Johnny asked.
\n“Yes, dear, He did,” said the mother patiently.<\/p>\n<\/a>
\nHarry Newton who still has two grandchildren babies — Eleanor, 2 1\/2 and Peter, two months — staying. To my eyes, Pampers, the stock, looks like a great buy. These things are not cheap and the babies sure use a lot of them.<\/p>\n