Fund manager stock picks here to stay despite rise of robotic ETFs, says Jupiter Asset Management
Technology is transforming the asset management industry, leading to a shift toward passive investment strategies and away from commission and fee-based fund management services.
So called passive investors, who simply track the performance of securities on an index instead of actively making decisions about which stocks to buy, have been outperforming recently, partly due to the development of automation, artificial intelligence and increased computer power that has led to the rise of robotic exchange-traded funds (ETFs).
However, while cheap, passive investment funds are challenging the traditional, active houses, investors still need a choice of both investment strategies, according to British firm Jupiter Asset Management.
“It is going to get more competitive but the business of fund management by humans is here to stay,” said Edward Bonham Carter, vice chairman of Jupiter Asset Management.
More and more fund managers are using data as part of their investment process, with some even becoming “closet index investors”, constructing their portfolios with similar securities and proportions to indices.
However, active investors who trade “concentrated portfolios” that do not resemble any index have a better chance of beating the market benchmark over time, and also provide clients with value for money on their fees, said Bonham Carter, who has been with Jupiter for 23 years, including seven years as CEO.
The possibility that stock markets are due for a correction or start to move sideways will also likely boost demand for active investment management compared to this year’s strong equity run that was beneficial to passive investors, he added.
The Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite hit closing highs every day last week. The MSCI China Index, which is up 47 per cent so far this year, touched a near 10-year high on Friday.
The boutique fund house, headquartered in London, manages about £46.9 billion (US$61.6 billion) in assets across its offices in Europe and Asia, including in Hong Kong and Singapore.
The Jupiter China Fund returned 3.45 per cent in the past week, beating 86 per cent of it peers, according to Bloomberg data. The fund’s top holdings are Hollysys Automation Technology (4.785 per cent), Baidu (4.652 per cent), Tencent (4.53 per cent), NetEase (4.5 per cent), Autohome (4.163 per cent) and Hangzhou Hikvision Digital Technology (3.694 per cent).
“Companies which have intellectual capital and can protect intellectual property should become more valuable such as software and service companies,” Bonham Carter said. “Retail is definitely more challenged across the world. They are not opening as many physical stores because technology has reduced the barriers to entry of the sector.”