But brighter days may lie ahead.
2011 was a bad year for fund managers, but I've only just realised how bad. Their professional pride will have taken a massive hit, as it was revealed that 67% of fund managers undershot their benchmark.
But that only hurts their customers, so they can live with that. Still, 2011 was a bad year for fund managers in a different way. As markets fell, their share prices tanked.
Aberdeen Asset Management (LSE: ADN) was one of the few to deliver a positive gain; its share price rose 3.7% over the last 12 months. Ashmore Group (LSE: ASHM) didn't do too badly, falling 2%.
After that, it is a story of mayhem and disarray.
Liontrust Asset Management (LSE: LIO) fell nearly 12%; F&C Asset Management (LSE: FCAM) fell 13%; Schroders (LSE: SDR) fell 24%; Jupiter Fund Management (LSE: JUP) fell 31%; Henderson Group (LSE: HGG) fell 32%.
As I said, it was a bad year for fund managers. A terrible year, a disaster. In fact, just the kind of awful performance that might tempt you to invest in the sector.
By far the worst performer was Man Group (LSE: EMG), the world's largest listed hedge fund operator. It published its fourth quarter trading statement on Wednesday, and reported that funds under management fell a mighty $6.1 billion in just three months, to $58.4 billion.
One of its biggest funds, AHL Diversified, fell 7.7%. Man Group was also hit by $5.6 billion of redemptions as investors fled for safer ground. It registered sales of just $3.1 billion.
It now manages some £11 billion less than it did last March.
Man Group is looking to make $75 million worth of savings, by cutting pay and jobs. That must have cheered investors, as did the news that the rate of consumption actually slowed, because its share price rose 6% on the news.
Investors were evidently expecting worse.
Like stock markets, fund manager stocks started 2011 year in a positive frame of mind. It all went wrong in the summer, as investors fled the eurozone, and started hunting around for safe havens.
Market volatility and reduced liquidity also made life hard for fund managers. So what next?
Man Group chief executive Peter Clarke is optimistic, expecting things to improve "as markets normalise and trading opportunities we emerge". Efficiency savings and a strong capital base should put Clarke's commandos in a good position when investor demand finally picks up, he says.
Jupiter also had a tough end to 2011, suffering a net outflow of £225 million in the final three months after it decided to close its Bermuda-based hedge operation. It still enjoyed positive overall net inflow of £746 million across 2011. As markets picked up, assets under management rose from £22.3 billion to £22.8 billion in the final quarter.
Again, chief executive Edward Bonham Carter blamed "volatile market conditions and reduced investor confidence". So will fund management groups automatically pick up when markets are less volatile and investors more confident?
Fund management looks a great business to be in. After all, you're effectively gambling with somebody else's money. If your funds struggle, your customers lose money but you collect your fees just the same.
Some fund managers have perfected this crazy model by charging performance fees when they do well, but refusing to offer any discounts when they do badly. In good years and bad, they pick up their annual management fees.
Investors have slowly got wise to this, hence the growing popularity of exchange-traded funds and other low-charging trackers, and the warm, almost desperate welcome, given to US tracker specialist Vanguards.
You can't automatically assume that fund managers will do well when markets do. After an initial stock market spurt when the eurozone panic eventually abates, growth is likely to be slow, as the Western world slowly begins the painful process of deleveraging. Fund managers might find it hard to get clients excited about growth of 3% or 4% a year.
That said, fund managers are an ingenious bunch, especially when squeezing money out of clients. Just look at the success they've had with fund of funds, which impose a double set of charges. In the first half of 2011, sales hit a record £3.8 billion.
I would rather invest in asset manager stocks than their funds. When markets recover, they should spring back from their current lows. Best of all, you can share in their growth without paying those hefty initial and annual management charges.
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