You're all wrong: active funds are better
Discussion
https://www.telegraph.co.uk/investing/funds/funds-...
Oddly enough they don't seem to name these high performing, high charging active funds.
Oddly enough they don't seem to name these high performing, high charging active funds.
Mr Pointy said:
https://www.telegraph.co.uk/investing/funds/funds-...
Oddly enough they don't seem to name these high performing, high charging active funds.
That was a master class in the use of smoke and mirrors!!!Oddly enough they don't seem to name these high performing, high charging active funds.
No names of these consistently outperforming active stock pickers, limited only to the UK market and provided by a company that sells on the merits of active stock picking. You couldn't make it up!
General message was buy the most expensive option to get the best investment returns - with no evidence whatsoever to support this.
By definition, half of active funds are likely to be beating the market average - before fees. And if some of them actually succeed in what they are trying to achieve the proportion of "success" should be better than that. It seems to me unlikely these managers would be able to sustain their generous rewards if they weren't actually achieving anything.
Tracking isn't free and, by definition, all trackers will underperform the market average - before fees. Their investment actions lag behind the market itself because they are buying too late and selling too late.
Yes, there are some poor performing funds out there. You should be able to beat the average by avoiding the dogs.
As for Neil Woodford .... woof, woof, woof.
Tracking isn't free and, by definition, all trackers will underperform the market average - before fees. Their investment actions lag behind the market itself because they are buying too late and selling too late.
Yes, there are some poor performing funds out there. You should be able to beat the average by avoiding the dogs.
As for Neil Woodford .... woof, woof, woof.
rockin said:
By definition, half of active funds are likely to be beating the market average - before fees. And if some of them actually succeed in what they are trying to achieve the proportion of "success" should be better than that. It seems to me unlikely these managers would be able to sustain their generous rewards if they weren't actually achieving anything.
Tracking isn't free and, by definition, all trackers will underperform the market average - before fees. Their investment actions lag behind the market itself because they are buying too late and selling too late.
Yes, there are some poor performing funds out there. You should be able to beat the average by avoiding the dogs.
As for Neil Woodford .... woof, woof, woof.
Yes, of course you are going to get active funds that out perform their markets. The problem, of course, is identifying them in advance!Tracking isn't free and, by definition, all trackers will underperform the market average - before fees. Their investment actions lag behind the market itself because they are buying too late and selling too late.
Yes, there are some poor performing funds out there. You should be able to beat the average by avoiding the dogs.
As for Neil Woodford .... woof, woof, woof.
The thing about this article is that it doesn't name any of them and the data was provided by a firm that only exists to recommend such funds and yet is constantly having to change its recommendations when their recommended funds actually under perform.
This company was still recommending holding Woodford right up until it was suspended, for example.
They are probably not that bothered though as they earn regardless of whether their recommendations are any good or not.
With a considerable amount of cost and effort it is possible to identify and pick above average funds in many markets, I've seen it done.
IMO however, a mixture of active and passive funds is the best solution for most investors.
Go passive in large cap, liquid markets where costs can really be squeezed (US large cap, Govt Bonds) and then spend more where managers can add value in areas like emerging markets and Investment Grade (and below) debt.
Some markets like the UK pose a different challenge in that the largest 10 stocks dominate making a FTSE tracker much more "risky" fund than people think.
Others such as Japan and Europe down to personal preference - I believe in active so invest accordingly although if a client has a strong preference for passives then I can live with that in these markets.
Property always active as well.
IMO however, a mixture of active and passive funds is the best solution for most investors.
Go passive in large cap, liquid markets where costs can really be squeezed (US large cap, Govt Bonds) and then spend more where managers can add value in areas like emerging markets and Investment Grade (and below) debt.
Some markets like the UK pose a different challenge in that the largest 10 stocks dominate making a FTSE tracker much more "risky" fund than people think.
Others such as Japan and Europe down to personal preference - I believe in active so invest accordingly although if a client has a strong preference for passives then I can live with that in these markets.
Property always active as well.
Fund management is pot luck imho; I appreciate that may offend some of the FM's on here! Better to get a computer to do it at the lowest possible fee imho.
TX.
Edit -
"Buffet bet $1 million that investment company Protégé Partners human stock pickers couldn’t beat an S&P 500 index tracking fund. The bet was to last ten years so this wasn’t a short-term. Buffet was determined to show that actively managed funds can rarely beat index tracker funds due to the large fees, expenses and human stock picking errors. Over the 10 year bet period, the S&P 500 index tracker fund averaged 7.1% per year while the human stock pickers averaged just 2.2%. Buffet won the bet and donated his winnings to charity."
TX.
Edit -
"Buffet bet $1 million that investment company Protégé Partners human stock pickers couldn’t beat an S&P 500 index tracking fund. The bet was to last ten years so this wasn’t a short-term. Buffet was determined to show that actively managed funds can rarely beat index tracker funds due to the large fees, expenses and human stock picking errors. Over the 10 year bet period, the S&P 500 index tracker fund averaged 7.1% per year while the human stock pickers averaged just 2.2%. Buffet won the bet and donated his winnings to charity."
Edited by Terminator X on Sunday 28th July 23:35
A simple rule:
Use tracker funds where the bulk of the return comes from market beta eg mainstream equities.
Use active funds where alpha is likely to be a much more significant part of the return eg bonds, specialist assets etc
Of course finding the right active manager is still difficult, but there are managers in these asset classes with impressive long term track records who have outperformed in a variety of market conditions.
Use tracker funds where the bulk of the return comes from market beta eg mainstream equities.
Use active funds where alpha is likely to be a much more significant part of the return eg bonds, specialist assets etc
Of course finding the right active manager is still difficult, but there are managers in these asset classes with impressive long term track records who have outperformed in a variety of market conditions.
rockin said:
Check out these annual returns from JPMorgan US Equity Income C Acc
2014/15 + 15.74%
2015/16 + 24.72%
2016/17 + 12.80%
2017/18 + 12.36%
2018/19 + 16.31%
Staggering. Double your money in less than five years.
Equity markets can offer good upside but have the potential for large drawdowns too!2014/15 + 15.74%
2015/16 + 24.72%
2016/17 + 12.80%
2017/18 + 12.36%
2018/19 + 16.31%
Staggering. Double your money in less than five years.
What were the benchmark returns for that fund?
I'm not aware of there being a benchmark for the fund although it has performed slightly better than its sector average. However, if you are interested in upper quartile North American Equity returns click the link. Some really big numbers in there!
https://www.trustnet.com/News/7457109/the-funds-to...
These sorts of figures make the 7.1% and 2.2% attributed to Buffet's challenge (above) difficult to understand.
https://www.trustnet.com/News/7457109/the-funds-to...
These sorts of figures make the 7.1% and 2.2% attributed to Buffet's challenge (above) difficult to understand.
rockin said:
Tracking isn't free and, by definition, all trackers will underperform the market average - before fees. Their investment actions lag behind the market itself because they are buying too late and selling too late.
Many tracker funds employ additional strategies e.g. stock lending to generate fees with the aim to offset transaction costs and the fees they charge, so it is easily possible for a tracker fund to match or exceed the index.The majority will not beat the index.
rockin said:
I'm not aware of there being a benchmark for the fund although it has performed slightly better than its sector average. However, if you are interested in upper quartile North American Equity returns click the link. Some really big numbers in there!
https://www.trustnet.com/News/7457109/the-funds-to...
These sorts of figures make the 7.1% and 2.2% attributed to Buffet's challenge (above) difficult to understand.
Interesting. My US buy and hold portfolio is up more than double the best performer there (1,189.53%) over the same 10 years!https://www.trustnet.com/News/7457109/the-funds-to...
These sorts of figures make the 7.1% and 2.2% attributed to Buffet's challenge (above) difficult to understand.
I should ask Mr Buffet if he wants another wager!
(I agree the figures attributed to the challenge above do not make sense and I was being light-hearted regarding my portfolio.)
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