Mutual funds have seen their heyday, which means they should begin a decades-long slow decline. Hedge funds have gotten away with savaging minimal investment acuity investors with a 2% and 20% fee basis for decades, and now have been exposed for the “Robber Barons” they are. The flight to reality is on. The hedge crowd figures to become an increasingly unpleasant scourge at tony suburban country clubs. Oh well, better days for a more enlightened investor lie at hand.
Back in 1989, with the benefit of inference reading and 25 years of on-the-ground experience in the international investment markets, I easily envisioned the carnage that lay ahead as I watched the mutual fund industry emerge into a virtual Jurassic Park. As the hedge fund crowd began reaping tabloid-style press, rather than the cloying adulation of old, I knew the game was up. It’s going to be unpleasant for mutual fund behemoths and income tax dodging hedge fund shysters, one and all.
Naturally, it’s going to take some time to sort through all the investment industry’s dirty laundry, but I project that Wall Street’s biggest brokers will feel the pinch hardest.
The financial markets’ cleansing broom will sweep a wide swathe. Engulfed in the “liquidation of the unsavory” will be the morass of financial industry leeches peddling packaged products like load funds and funds saddling the naïve with incomprehensible back-end 12-b1 suckers and all forms of deferred sales charges.
On the right side of the curve will be, as they always have been, and will be for the unmeasured future, old-line, white-shoe bank trust departments that have established family relationships going back decades, as well as austere family-run investment counsel firms specializing in personal attention, prudence and attention to detail. These firms will continue to welcome a thoughtful, seasoned clientele that expects nothing less than confidentiality and a balanced approach to preserving generations of family wealth.