That reputation has been hard won around the world but it is squandered quickly. The MSC must urgently review their standard to prevent MSC-certified products being caught alongside unsustainable methods of fishing. The use of nets to catch free swimming tuna in the region was certified sustainable by the MSC in and is set to be renewed this year, according to an independent technical report. But the same vessels can also at other times use fish aggregating devices FADs — floating mats that attract life in the open ocean. But, he is recognizing that the betrayers are acting out a deep need to fill up the broken, emptiness within their humanity.
The forgiveness of which Jesus speaks is mercy, not power.
Mercy, not power, is the creation of life. The mercy of forgiveness, beginning with mercy for our own brokenness, energizes new life, resurrection.
As we gather together Thursday, Friday, Saturday, and Sunday listen to the stories, hear again for the first time the actions of God through the lens of merciful forgiveness, not transactional power forgiveness. I believe that was the wrong judgment. If you, as investment advisers, share my views, where should you turn to replace those funds that have failed to measure up to the trust that you and your clients have placed in them?
In my view, you should select funds from those organizations that have strived to strike a proper balance between the interests of fund shareholders and the interests of fund managers—those who, if you will, have placed a heavier weight on stewardship than on salesmanship, those who have done their best to put service to shareholders above service to themselves.
Every profession has elements of a business. No organization in which expenses exceed revenues will long exist. I have no particular wisdom to offer other professions about returning to their roots. The scandals have given us all the opportunity to address that balance in a new light, for, when you think about it, the scandals have arisen when fund managers have clearly put their own interest in asset-gathering, business-building, and the maximization of fee revenues ahead of the interest of their fund shareholders in financial integrity, fair treatment, honest disclosure, and optimal investment returns.
But the bane of the scandals, truth told, is a blessing in disguise. We have come a long, long way from the mutual fund industry that I joined in Then, the field was composed primarily of funds whose returns would more or less track the stock market itself; funds with low costs and low portfolio turnover; funds designed for long-term investors; and fund managers that measured up to this standard: We sell what we make.
What a difference a half-century makes! Today, most of the funds that our industry offers to investors are relatively undiversified funds with high costs and high portfolio turnover; funds designed for market traders and short-term speculators; and fund managers that hew to a new standard: We make what will sell.
When and if you decide that you and your clients have had enough of the sharp practices and misbehavior that have characterized the scandalized firms and decide to move assets to another fund or organization, it is these firms that I believe you should consider. You know as well as I do—maybe better!
So I recommend that funds be considered or, for that matter, ignored by the extent to which they place the interest of their shareholders ahead of the interest of their managers—the very principle suggested by the Investment Company Act of Through what I call the Stewardship Quotient SQ , we can measure twelve elements that help to reflect the degree to which the funds balance these two distinct, and often competing, interests. Before I describe these twelve elements, a disclaimer. I offer the highly subjective viewpoint that was the driving force in my creation, 30 years ago this coming September, of a firm that would hold stewardship as its highest principle.
Even though my career has, alas, reflected those values of stewardship imperfectly, you may regard my listing of these elements as self-serving, especially since the model of a fund group with a mutual, shareholder-owned structure has yet to be emulated, or even copied.
A Challenge to Judgment I have no particular wisdom to offer other professions about returning to their roots. It is not easy to measure trust and confidence and integrity, but information about the age, education, professional experience, and tenure of fund executives and portfolio managers is widely available. On the issue of whether fisheries should be allowed to catch both certified and non-certified fish, the MSC will launch a formal consultation on Friday, with a recommendation going to the MSC board in January. Twitter Facebook Reddit Print Email. I offer the highly subjective viewpoint that was the driving force in my creation, 30 years ago this coming September, of a firm that would hold stewardship as its highest principle. Gradually, both public and private management companies were purchased by giant financial conglomerates—banks and brokers and insurance companies, U. Post was not sent - check your email addresses!
But please know that I gain no pecuniary benefit by fostering these standards, only the profound conviction that they are the right ones for fund investors, the right ones for you, and, in the long run, the right ones for the fund industry. Exhibit One will help you follow my reasoning. For example, a firm with two points in each category 24 in total would have an SQ of Now, let me cut to the chase, examine the twelve standards, and tell you the ratings that I would favor.
Nowhere is the conflict between fund managers and fund shareholders more sharply and obviously manifested than in the level of management fees and operating expense ratios—from 2. This pattern is not period-dependent; during the decade, the return enhancement was an almost-identical 2.
The relationship between expense ratios and returns is consistent not only over time, but over styles as well. The range of annual returns of the highest-and lowest-cost quartiles run between 1.
Such a gap, of course, is intuitively obvious: If all of these expert professional fund managers, competing with one another, are, and indeed probably must be, average before the deduction of costs, then it is costs that will differentiate them. One major aspect of stewardship, then, is the setting of management fees, reconciling the clear conflict between managers who seek to maximize their fees and shareholders who benefit by minimizing them.
Lower fee rates, therefore, reflect a higher stewardship score. Since lower expense ratios clearly lead to higher returns, it is only common sense for fund advisers to do their fund shopping in the low-cost quartile 1. Higher turnover correlates with lower returns.
These return gaps appear to reflect largely the costs of turnover. For taxable investors, however, turnover also increases the tax burden, and on an after-tax basis the advantage for the low-turnover quartile.
This gap is manifested in an even larger three percentage-point advantage in annual performance— Since the high-cost funds annual standard deviation of Whether we like its decision or not, the jury is in, and has rendered its verdict: Funds that are managed with a view toward low operating and turnover costs for their investors reflect a significantly higher concern for the stewardship of investor assets than their peers. Even as stewardship has something to do with organizing, operating, and managing mutual funds that have low costs and low turnover, it also has something to do with offering mutual funds that are very broadly diversified and designed to be held for the long-term.
At one extreme lies the all-stock market index fund, owning essentially all of the publicly-traded equities in the U. At the other extreme, we have the specialty funds, investing in narrow market sectors such as telecommunications and technology, ultimately created for trading purposes. And in the middle lie the funds following various style specialties—mid-cap value, small-cap growth etc. In its early era of stewardship, the fund industry was dominated by broad, market-oriented funds.
But in its recent era of salesmanship, such funds have found themselves in the minority, surrounded by an army of more specialized funds with narrow policies. I admit to a strong bias toward highly-diversified funds, especially low-cost index funds. What is more, the record is clear that the gap between the returns earned under the highly-diversified, low-cost, broad market concept, relative to the more concentrated funds-as-individual-stocks concept, is far larger than the cost differential.
Because the cost differential reflects only the economic component of the investment management service. But there is also large emotional component to the returns earned by investors. Since buying and holding the entire market is apt to entail far less trading and far less emotion, such investors actually earn the market return.
But when fund managers act as salesmen of specialized funds, investors almost universally act at the wrong time.