A New Rentier Class

Portfolio manager Conor Sen suggest active management will survive due to several factors: Gen-X / Millennial investors; crowded trades in passive investing strategies; “opportunistic CEO’s”; and developments in algorithmic trading. Sen also notes that hedge fund and institutional money managers still have an aura: this is a cultural myth sustained by endowment and pension fund flows.

 

In the long-term, I see a new rentier class emerging to service the 1% elite. Today’s asset classes will be modelled as alpha generation, trading, and execution algorithms. New types of arbitrage will be developed. The existing cultural myths will continue as a smokescreen. The truth may filter out in other sources: investigative journalism exposes of offshore tax havens; or Russian download sites on foreign exchange trading in Eurodollar markets.

 

Sen’s active managers of the future may be closer to Charles Stross or William Gibson than the 1980s era of the Big Swinging Dick trader (Michael Lewis) or Masters of the Universe (Tom Wolfe).