One of the last things investors and financial advisers need in 2014 is more new investment fund launches.
This might however be on the cards following the results of the latest CBI/PwC Financial Services Survey.
This survey found 76% of investment management firms were optimistic about their businesses as at the end of last year.
It’s up from a net balance of 29% in September 2013 and was accompanied by the news that 49% expect new products to be a source of growth.
So we might expect to see lots of new investment funds launched (no doubt each accompanied by a big fanfare) this year.
What we hope not to see is lots of ‘me too’ fund launches.
There are already more collective investment funds in the UK than individual company shares, creating a myriad of choices for retail investors and allowing many mediocre funds to get lost in the mix.
Rather than launching new funds, we would prefer to see investment management firms rationalising their current suite of funds, knocking on the head those which have failed to perform over the past decade or those without sufficient assets under management to make them sustainable over the longer term.
Perhaps it is time to introduce a ‘one in, one out’ rule for new funds?
Fund providers should only receive FCA approval to launch their latest innovation once they have agreed to close an underperforming fund.
In most instances, investors are best advised to steer clear of new fund launches and wait three to five years before investing, to understand how the manager is able to implement their strategies successfully.
In the overwhelming majority of cases, better options already exist which remove the need for investors to consider any new fund launch.
