Gen Z Can Teach Asset Managers a Thing or Two
Imagine you’re an investment pro at one of the UK’s big asset managers. You’ve been doing this for 20 years, made many hundreds of company visits and listened to thousands of brokers’ calls.
You might have an MBA (21 months, £115,000) or even gone full CFA (minimum 300 hours of study per level, pass rate 40%). You know your z-scores from your r-squared. Now imagine that your professionally run portfolio just got outperformed by a 24-year-old with none of your credentials or barely an inkling of how a price-earnings ratio works, let alone the ability to calculate a discounted cash-flow model.
That’s what just happened to a large group of UK fund managers. In the first quarter of 2024, the Investment Association Mixed Investment 40-85% sector — a reasonable benchmark with retail investors given its mixture of bonds, equities and cash — rose 4.2%. The average portfolio held by 18- to 24-year-olds at Interactive Investor, one of the UK’s retail investment platforms, rose 5.1%. Review the performance of all II customers over two and three years and, assuming you’re a fund manager, you’ll see something equally depressing: The amateurs have returned 6.8% and 12.8%, respectively. The pros have returned 10.7% and 5%. Things don’t look quite so awful if you compare the pros against all Interactive Investor customers (4% vs. 4.15%) or extend........
© Bloomberg
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