The business model of fund management

Fund management should be a fabulous business proposition. Employ a few smart managers, build a marketing team, sell a sexy new idea, take in assets under management and then retire off the AMC.

Back in the real world it does not quite work like this. The demise of New Star and the troubles at Gartmore suggest even the big boys are experiencing some basic problems with their business model. Much of the existing debate has centred around the itchiness of star managers yet I cannot help but think the real problem resides in the fact the economics of asset management do not quite add up anymore. More failures, closures and meltdowns are likely to follow over the next few years, forcing advisers to think hard about the resilience of their investment partners. Much of the pressure...