Nothing against you – or even your firm. There are only so many good ideas and so much liquidity out there. If you are sitting on $900B AUM you can’t help but match the index. And if you can pull 125 bps for that, more power to you.
We have a couple enhanced-indexed funds. They offer high information ratios that attract institutional investors. And they can be good for 401k plans too. Although I don’t personally like the investment philosophy of enhanced indexers, ours have performed well. Net of the 100 bps we charge we’ve still outperformed over 10 and 15 time frames. On the individual private client side, wrap accounts are really changing the dynamics of what funds get the flows. When an advisor is charging a client 50-150 bps to pick investments they have to (attempt to) choose investments that are in favor and actively manage them themselves. This leads to advisors not necessarily picking mutual funds with strong 10 year records, but funds that have investment processes that they believe will be in favor, maybe only for a short while, then move on to something else. When you had wirehouse brokers buying A shares they had to stay in a fund forever (figuratively speaking) so long term results were what mattered. RIAs and other fee based advisors don’t care as much. Or they just dump everything into Blackrock Global Allocation or Ivy Asset Strategy and call it a day.