Halifax FTSE 100 Tracker ISA

Dooooooooooooooonut

Aegis wrote: »

I'd be extremely surprised, actually. If you define beating the index as a statistically unlikely event of, say, 25% probability in any given year (still less than what you'd have to believe based on some research), then in order to beat the index for 10 years in a row, you'd need to get lucky and beat odds of 0.0000954%. Even at 50% (i.e. the same as a coin toss), the chances of a given fund manager doing this would be 0.0977%. Assume that the fund manager is allowed a year of not beating the index in that time frame and you increase the odds slightly, but still not by enough to make this claim of blind chance stick.

And what happens if we sack underperforming managers?

Aegis wrote: »

If the fund manager universe consisted of tens of thousands in each sector, then you might expect to see one or two consistently beating the index over a 10 year period, but you certainly shouldn't see what we do, which is tracker performance consistently being mid-table compared with some of the big names out there.

Said tables do not take fees into consideration. Introduce these and I would be astonished if trackers do better... and don't forget if you detrend the data (which you must do) then you would expect trackers to be mid way... and the market is not so far off where it was in Jan 1999.

Aegis wrote: »

All in all, the maths argument really doesn't stick too well because of all the factors involved, but this simply shows that seeing something occuring on a fairly regular basis and putting it down to blind luck simply doesn't work out in terms of number.

There have been a few efforts in the UK to work out how much value a specific fund manager adds to the funds under his direction, and they generally seem to come out with a few good names each year who manage to stay ahead of the index fairly consistently. I put that down to skill rather than luck.

Right, so how much value do they add then? How does said value compare with management fees?

dunstonh

Said tables do not take fees into consideration.

Yes they do. Performance tables are after annual management charges.

Introduce these and I would be astonished if trackers do better

Figure for the main two FTSE index trackers are shown earlier.

fimonkey

Wow, I started to follow this, thought I understood, then became utterly lost!

Yes or no answer to the following from an IFA would be appreciated.

1. Taking into account management and other fee's. Do 100 FTSE trackers perform better over 10 years than a fund, given a level of risk identified as 'medium'?

Thanks in advance.

Lokolo

One persons medium is another persons low....

I think dunstonh usually goes by risk of percentage factor, so how much would you be willing to lose before you start getting jitters, plus a few other facts...?

With L&G, trackers do not do as well as managed funds according to dunston's magical table of wisdom, which, as he stated, takes into consideration management fees.

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As you are quite 'new' to this forum, just so you know, dunstonh is an IFA, Aegis training to become one and I am a noob very bored at university trying to learn about investments and finance. Donut no idea who he is, what he does or anything, I imagine he is an old guy who just hates life.

dunstonh

1. Taking into account management and other fee's. Do 100 FTSE trackers perform better over 10 years than a fund, given a level of risk identified as 'medium'?

FTSE100 trackers are more medium/high but that would depend on your risk scale. I would put them at risk 7 on a 1-10 scale when looking at unit trusts (1 being cash). You have to compare like for like. So you would compare them to other funds in their sector which is the UK all companies sector.

So, amending your question slightly to reflect like for like basis...

amended quote: "Do 100 FTSE trackers perform better over 10 years than a fund, compared to other funds in the same sector (UK All companies sector)"?

The answer over the last 10 years is no. See post 9 that has the data on sector average (average of all the funds in the same sector), L&G FTSE100 tracker and L&G all share tracker.

Over that 10 year period the L&G FTSE 100 tracker finished ranked at 94% in its sector. That puts it in the bottom 10%. It couldn't really be much worse. The top fund would be at = 1%. Average = 50%. Worst would be 100% just in case anyone doesnt know what percentiles means.

fimonkey

Lol thanks for the info on who's who Lokolo, and Dunstoh, as evr you're a star! (though a star with too mcuh time on their hands and an addiciton to this forum perhaps? ;-) )

To add to it, I'm a potential FTB, age 32, pension and cash savings all sorted and with a bit of spare cash (£50) each month to 'invest'. However I have NO financial background and my maths and understanding of anything vaguely related to maths is appalling!

Thanks once again to the informative answers, you do quickly get to know who's talking sense or not in these boards (Dooooooonut may soon be on my ignore list).

Aegis

Dooooooooooooooonut wrote: »

And what happens if we sack underperforming managers?

Then the managed funds become better as time goes on, and the long-established managers are likely to add considerable value.

Said tables do not take fees into consideration. Introduce these and I would be astonished if trackers do better... and don't forget if you detrend the data (which you must do) then you would expect trackers to be mid way... and the market is not so far off where it was in Jan 1999.

Errr, the performance tables take account of the total return. The annual fees are included. The initial fees can almost always be fully discounted by going through the right broker, so those are fairly safe to ignore for the majority of funds.

Why would you make this claim?

Right, so how much value do they add then? How does said value compare with management fees?

That's something you can determine from the statistics is you take time. Essentially if the manager adds more value on average than the management fee, you're likely to get a fund better than a tracker.

Dooooooooooooooonut

Aegis wrote: »

Then the managed funds become better as time goes on, and the long-established managers are likely to add considerable value.

NOOOOOOO.

Go on, try this with coin flippers and see what happens. Eradicate the losers every year or two.

Aggh, I give up. Carry on chasing noise... You can lead a horse to water...

P.S. Old guy who's tired of life? Not really.

P.P.S. Although I am quite a bit older than Lokolo, but if you want to believe a student over someone who's been trading for over a decade now (which is a long time in this business) and has also met enough fund mangers to know that the majority of them are completely !!!!ing idiots then, meh, whatever.

P.P.P.S. Get a commodities tracker if one exists that is cost effective at that budget. That (the existence of one) is the kind of question an IFA is good at answering.

Lokolo

Dooooooooooooooonut wrote: »

Aggh, I give up. Carry on chasing noise... You can lead a horse to water...

But you can't make it drink! Oh I am wise!

Dooooooooooooooonut wrote: »

P.S. Old guy who's tired of life? Not really.

Ha its only because all your replies are so negative and depressing that I think that. Make them more cheery or happy, or at least stop rar-ing on about IFA and/or Dunston being crap at his job

Dooooooooooooooonut wrote: »

P.P.S. Although I am quite a bit older than Lokolo, but if you want to believe a student over someone who's been trading for over a decade now (which is a long time in this business) and has also met enough fund mangers to know that the majority of them are completely !!!!ing idiots then, meh, whatever.

If you read my post I said you don't have to take my advice (to the OP) because I am a noob student just trying to learn more about investments and finance. All I did was repeat the table and repeat what others had previously said

Aegis

Dooooooooooooooonut wrote: »

NOOOOOOO.

Go on, try this with coin flippers and see what happens. Eradicate the losers every year or two.

Thank you for proving my point. If you eliminate those who only succeed through luck (eventually burning out) and replace them with a new intake of managers who also rely on luck, you should see a random scattering around the mean forming a normal distribution, with the winners and losers being decided by random each year.

This is not what we see. We see consistent good performance from certain funds and their managers, indicating that the good performance is down to more than just luck.