Vanguard founder Jack Bogle has said active asset management companies are better off doing nothing and continuing with their current business models than slashing fees in a bid to compete with passive providers.
As reported by Citywire Selector’s sister site Citywire USA, Bogle set out two short-term strategies for active managers while speaking at the Morningstar conference in Chicago.
Bogle said active companies are broadly split between those closely held and controlled by founders, executives and minority shareholders and those overseen by banks and financial giants.
He urged those closely held to ‘do something’ and not just stand waiting for passives to take over but cautioned against unnecessary product build out or aggressive fee cutting which would weaken their core offering.
‘Boring as that “do-nothing” strategy might seem, it is far more likely to preserve the profits of managers than slashing fees, or more aggressive marketing, or jumping (likely fruitlessly) on the bandwagon of low-cost traditional indexing,’ he said.
Bogle added that moves towards smart beta funds and niche ETFs might generate short-term flows but that he was sceptical of the concept.
To read the write-up of Bogle’s speech in its entirety please click here.