Alan Miller on price clustering among asset managers.

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We recently published new research, backing up the recent FCA Asset Management Study findings regarding price clustering (i.e. cartel like pricing) within the UK fund management industry.

SCM Direct analysed the non-index or tracker clean share classes of 683 funds with a combined Assets Under Management of £320.5 billion.

We found that 70% by number of this extensive sample of funds, had an identical Annual Management Charge (AMC) of 0.75% pa. In terms of overall, assets managed the figure was slightly higher at 73% charging an identical AMC of 0.75% pa. Of course, 0.75% does not sound a lot but a reduction of just 0.1% pa, i.e. from 0.75% pa to 0.65% pa, would benefit UK savers and investors by £488m every year.

When you consider that these huge fund groups hire teams of analysts and expert fund managers who all claim to have a unique investment strategy that can produce better investment returns than their competitors, the price clustering does not reflect this. Different products, with different ‘ingredients’ and vastly different track records should command different pricing, precisely because they are different products. Whether the fund is run by 2 or 20 people, be managing £200m or £2,000m, have a brilliant or disastrous track record, the price charged by active retail fund managers does not seem to change.

I find it impossible to think of another industry in which there are thousands of products and yet irrespective of major differences, they charge consumers the identical price.

This shows, at least in terms of price, there simply is no competition. Consider every other product you buy – on a like for like basis the price has fallen over time, as the benefits of economies of scale and technology has produced efficiencies that have benefitted industry and consumers alike.

Furthermore, there is evidence that the large funds do not pass on their significant economies of scale back to customers through lower prices, and are even more likely to charge an identical price. Again, it is hard to think of another industry in which the largest participants charge the same price as the smallest participants. Would you expect Ford to charge the same as Ferrari? It is absurd.

One publication published the views of Gary Potter, co-head of F&C Multi Manager Solutions who dismissed our criticisms as ‘dangerous’ and ‘naïve’. He said that “It is very dangerous to tar people or sectors, or the entire active space with the same brush. It’s naïve in fact.”

Of course, he failed to respond or dispute any of the numerical conclusions or methods of analysis from our research. Interestingly, it turns out that the range of F&C Navigator multi-asset retail funds he co-manages charges the same AMC as the 0.75% pa number highlighted in our report to which he attacks!

He then decided to make this into some active vs passive debate and said that it was “easy” to be critical of active management during tricky market conditions and that the story may be different in 12 to 18 months’ time when he envisions a “rebound for active managers”. Mr Potter seems not to have read the actual report as it makes no reference whatsoever to the (dismal) performance of active managers.

Like many of our reports since 2009 – hidden fees, closet indexing, conflicts of interest, research commission payments and many more – we have been waiting for a killer argument from the UK investment industry as to why our data or conclusions are wrong.

We are still waiting.


Alan Miller – Founding Partner & Fund Manager, SCM Private that launched the revolutionary on-line wealth management sites:, and in September 2014. Investors can now save 2/3 rds of the typical costs of well known wealth managers and access a revolutionary tool that enables them to see the total cost in £ before they invest.

SCM is a wealth management company utilising the power and efficiency of ETFs to make investing better spread, lower cost and more liquid with Alan using his exceptionally long and varied experience as an exceptionally successful active manager, to offer investors a pioneering approach to wealth management.



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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