RDR will expose poor value for money managers: Buxton

Schroders’ Richard Buxton believes the RDR could flush-out managers who simply track their index while charging hefty management fees.

Buxton, who manages Schroders' flagship £1.9bn UK Alpha plus fund, says far too many managers with UK retail funds are ‘closet index trackers' who fail to justify their charges.

"There are far too many fund managers, there are far too many funds and there are far too many actively-managed funds which fail to deliver and justify their charges," he says.

However, he suggests there may be changes afoot with the arrival of the RDR in 2012.

"If you fast forward to 2012 and the RDR, if it does make commission fall away and there is a real focus on what charges are, then I think it is quite likely the market will differentiate even more between genuine passive and active-managed funds, and those which really work and are worth paying for.

"It will be interesting to see if the changes sound the death knell for the whole swathe of ‘me too' near-index active funds."

Thames River multi-manager, Gary Potter, also criticises index-tracking active funds, but comes to the defence of performance fees for managers who do a good job.

"There is a definite case for those managers who simply track an index to be dealt with," says Potter. "But for those people who can find and deliver excellent results consistently - it is worth paying for."

OBSR director and co-founder, Richard Romer-Lee agrees and says clients are happy to pay a performance fee when the manager consistently delivers market-leading performance.

"I am a firm believer, as is the intermediary market, if something is good it is worth paying for and this is true for anything you buy whether it is a house, a car or a fund," says Romer-Lee. "People are very happy to pay for good returns."