UK - Scheme performance is suffering because UK fund managers lag behind their US counterparts in short-term trading and spotting undervalued firms, Bedlam Asset Management claims.
The firm, which operates a no-gain, no-fee policy, says UK fund managers base their investment decisions on what percentage a stock forms of an index or recommendations from investment banks.
But Bedlam says this means fund managers are unsuccessful when it comes to short-term trading.
As an example, Bedlam cites the bid for mortgage lending bank Abbey.Its share price has fallen consistently since it hit £14 per share in 1999 and has been virtually unchanged since January – despite the £8.8bn bid by Spain’s Banco Santander Central Hispanico.
Bedlam says that US fund managers – in contrast to their UK counterparts – have doubled their stakes in Abbey since the start of the year and are set to profit from the takeover.
Bedlam founder Jonathan Compton (pictured) said: “Why can fund managers based in Los Alamos and Peoria do so much better than their UK counterparts, when it comes to short-term trading and spotting value? The answer is there are two principle drivers.
“The first is what percentage a given stock constitutes of an index.
“The second is what their brokers say, as too many only move when given the thumbs-up by their friendly investment bank.”
Compton also attacked the industry practice of going underweight or overweight in a sector.
He said investors would be better served if fund man-agers exited sectors they were negative on.
“This is just sheer nonsense. It means that a fund manager who is cautious on the outlook for UK banks and financials is likely to still hold one-fifth of your assets in a sector he believes is going down.”
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