A few years ago, when I was still working at Congress House, I had a lunch (not an expensive one I should add) with a fund manager. I actually quite enjoyed talking with someone with a very different perspective on some of the things that I bang on about. But one topic of conversation really grated, and it has stuck with me to this day - BA.
What irritated me was the fund manager's assertion that BA was overmanned and its staff overpaid. It's an assertion that gets repeated by asset managers in a lot of the coverage of the current strike. Now I don't pretent to know the ins and outs of the airline industry, or how BA compares to other airlines. But I am sure that BA staff deliver a real, tangible service. The contrast with fund management could not be more obvious. Good, I'm glad you agree. But let's to be clear on a few specifics.
If you remove BA staff, the airline will not operate, the planes won't fly and no-one will serve you a delicious (sick) in-flight meal. In fund management, you could just use a computer programme and get broadly the same result, this is after all the index-tracking business in a nutshell. Secondly, the service that BA customers receive is provided by the BA staff. The pilots fly you, the ground crew make sure the plane can fly, the cabin crew look after you during the flight. In fund management the service - the returns - is ultimately provided by someone else, the people working in the companies whose shares you hold via the manager.
It never ceases to amaze me how people seem to have this implicit view that fund managers generate returns. Actually what they do is select coupons (they don't invest money 'in' companies), and week in week out many of them are paid very highly for doing this worse than a computer programme could.
This shouldn't surprise us either. Effectively employing fund managers is like paying someone to go on Deal Or No Deal and choose the boxes for you. The future is as unknowable as the contents of Noel's boxes, and the historic results of active asset managers demonstrate this rather well. Pension funds and other asset owners might - as Paul Woolley suggests - be better off doing it all themselves, as they used to for much lower costs.
I'm sure a lot of people won't sympathise with the BA strikers, I do. But at least next time you read some fund manager telling you that BA needs to cut its costs remember that part of your pension is being needlessly shovelled their wallet. People need airlines to undertake air travel, professional fund management on the other hand is arguably an entirely unnecessary industry.