Comment by Joy Dunbar, Editor of Absolute UCITS
The implicit and explicit effects of inflation can be felt
globally and for the asset management industry this creates an
opportunity as well as a challenge.
On one hand, investors need investment products, with
risk-adjusted performance, that beat inflation - and this is an
opportunity for the alternative UCITS industry.
The industry thus has an opportunity to develop and launch new
products for retail investors who want to save either into a
defined contribution pension scheme or long-term savings
On the other hand, the returns from asset management are being
squeezed in real terms by increased inflation - as well as the
increased costs associated with changes to regulation,
compliance and other global measures impacting the financial
This means in practise that charges will go up and/or asset
managers will seek to cut costs - or a combination of the two.
Asset management companies should try to create long-term
products that provide good risk adjusted protection from
inflation and above real interest rates - creating funds that
people want to invest in the long term - which would be good
for their business.
This is where an onshore product that aims at absolute returns
and which can also hedge, like an alternative UCITS, comes
For the onshore investors, this can be a welcome development -
if it protects on the downside, with low volatility and
[hopefully] with a high single-digit return in the 'new normal'
era - of low interest rates, shrinking growth and low
The solution to one problem may of course create another: if
alternative UCITS do attract a lot of assets, then there will
be larger funds - which tend to have lower performance compared
to smaller ones.
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