Does Size Matter?

Or is it what you do with it that counts? Chief Investment Officer Europe considers this timeless question.

Welcome to the size issue.

It was difficult to refrain from splashing “Does Size Matter?” across the front cover.

Not just because all the articles treat upon something size related, but because the naughty teenager that still resides in my psyche thought it might raise a giggle from our esteemed readership. There’s plenty to be down about at the moment—at least, temporarily, financial markets are not one of them—and light-heartedness is in short supply.

Conversely, air miles were in great supply this summer and for our first size-related feature, I visited the tiny principality of Monaco. It is smaller than Central Park but has more millionaires per capita than anywhere else in the world. One in three people can put their hands on liquid assets worth over £1 million—and many more besides—at a moment’s notice. A paltry one in 20 could do the same in NYC (most of whom probably have residences overlooking Central Park, however). Find out how this non-wealthy visitor managed in the casino city of Monte Carlo.

Sweden, where Assistant European Editor Nick Reeve travelled this summer, is famous for size, too. Its people are very tall, he reported, adding “they’re also mostly blonde and even the ugly people are gorgeous”. Those people are facing a size challenge of their own, however, as the esteemed AP “buffer” pension funds are set to be whittled down from five to three. In “The Unknown”, we find out that tackling larger asset pools are just the start of their potential problems.

For this issue’s Interrogation, we spoke to Mark Fawcett, CIO of the National Employment Savings Trust, the UK’s multi-employer pension that is set to become the largest defined contribution set-up in Europe. How have he and his team created and positioned something that will rapidly grow both in assets and member numbers over the next 30 years?

And finally, our cover story: “Too Big to (Not) Fail” looks at the flagship funds that asset management shops hold up as their pièce de résistance to entice investors. Despite these trophy funds being household names (in my house anyway), their performance often leaves a lot to be desired. Their lumbering size, reaching into the hundreds of billions, can stand in the way of their opportunistic instinct and too often investors are left with returns that are less than they expected.

How many of these investors actually leave, however? Not many, judging by the asset pools.

To sum up, size is all relative—and (just because I really am 17 at heart) we all know it’s not what you’ve got, it’s what you do with it that counts.

Enjoy the issue.