Low fees and scale are powerful forces, and execution efficiency has become the industry’s default mantra. But in the relentless pursuit of cost awareness and operational smoothness, it’s worth asking: at what cost?
True returns are often harvested in areas of complexity and illiquidity where fewer are willing or able to go.
If low-cost becomes the key metric and hurdle, investors risk optimising away the very premia that drive long-term performance.
Size and scale certainly brings enormous advantages: broader reach, lower transaction costs, and the ability to standardise investment processes. Yet, the very characteristics that make scale and low fees attractive can also create a blind spot. The most interesting sources of return - illiquidity premia, structural inefficiencies, complex strategies - rarely lend themselves to mass production . By definition, they resist commoditisation. The question then becomes: how do investors balance the comfort of efficiency with the challenge of capturing returns that only exist in the less scalable corners of the market?
At the end of the day, it comes down to this:
Are you investing for low-cost beta, or for carefully crafted, long-term, quality alpha?
