Days of Easy Money Are Over for Fund Managers: Alice Schroeder

Jan. 19 (Bloomberg) -- As a profit-making endeavor,managing other people’s money is hard to beat. The businessrequires very little invested capital. There are no worriesabout getting paid in full when the bill comes due, sincefund managers control their customers’ money. Andlackluster performance is no bar to hefty profits becausefees, based on the dollar value of assets under management,are paid even when returns are abysmal.

Wall Street, it often seems, is exempt from the lawsof economics. Most active money managers produce worsereturns than an index, such as the Standard & Poor’s 500.But making enough money to look respectable to clients hasbeen relatively easy as long as falling interest ratesboosted the value of most asset classes.