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Friday, February 15, 2019|
Less Is More, In the Eyes of a Retiring Fundster Chief
A big fund firm's retiring chief is urging her fellow fundsters to keep it simple.
Indeed, that formula seems to have worked well for Charles Schwab Investment Management [profile], where Chandoha serves as CEO until she retires at the end of next month. The asset manager now has $360 billion in AUM, and its growth is largely driven by its lineup of just 22 ETFs (compared to hundreds of funds at other big firms), and Schwab and other ETF giants have kept many of their ETFs very low-fee.
Yet Chandoha's perspective may in part be coming from Charles Schwab Investment Management's special position. As the asset management arm of a brokerage and custody titan, CSIM has automatic distribution allies and can afford to cut costs on one part of the chain (say, asset management) when it's also elsewhere on the chain (brokerage or custody). While there are other asset managers with scale, some with even more scale than Schwab, and there are brokerage or custody firms affiliated with asset managers, the vast majority of asset managers have neither of those advantages. Most asset managers have to fight for platform placement, to stand out from the crowd, to make their case, while not being able to drop their fees under 10 bps or 20 bps (like many of Schwab's ETFs). Differentiation often goes hand in hand with complexity, and pricing is hard to slash too much without scale.
Still, CSIM's success, especially in the ETF space, is hard to deny, and it undoubtedly provides a model of a way to make it through an increasingly difficult asset management distribution marketplace. The lessons from its success, though, may be tricky for many competitors to apply. But keeping your product offerings focused instead of throwing dozens of ideas into the market to see what sticks may be a good one for many boutiques to heed, if they're not already.
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