Want 5% on £300k

darkpool

psychic_teabag wrote: »

FWIW this monevator article contains a link to
this report
which tries to equate turnover rate to an equivalent effective annual charge.

excellent post.

so it looks like trackers have a small PTR and the managed funds have a huge PTR. It really is criminal how the Total Expense Ratio doesn't cover total costs.

It's a bit like agreeing a price with a taxi driver to take you to your hotel then the driver wants an extra 20 quid for taking your luggage as well.

Aegis

darkpool wrote: »

The Financial Times is my beacon of light in the money management darkness.

I can't be bothered googling every UT and IT annual report. But looking at the Portfolio Turnover Rate for Henderson Global Innovation showed 167% to 31/5/10 and 229% to 30/11/09. That's near enough an average holding time of 6 months. So for that UT annual fees will be close to TER + at least 1.5%

If you think i'm lying fair enough. Just have a look at your annual reports and see what the Portfolio Turnover is though.

Ok, first fund I picked, the Invesco Perpetual High Income fund. Portfolio turnover rate of 15.4%. Average holding period of a stock is therefore 6.5 years.

M&G Global Basics: 15.59%

Fidelity Special Situations: c30%

JPM Natural Resources: 68% (highest I've found so far, but given the returns I'm not complaining at all - outperforming its benchmark index by 40% over the same year as that turnover rate is acceptable to me, though this is obviously not representative of the long term performance).

So, of the ones I've seen so far only one of them has an average holding period of under 2 years, and that one has more than enough returns to justify the stock-selection process backing the fund. It would seem the typical unit trust has a holding period considerably longer than 6 months, so again it seems you have picked the outlier rather than a fund representative of what a typical investor might be holding.

Aegis

Rollerball wrote: »

Who cares. Even if it were 'only' 2% it would still be 2% too much.

Actually I'd go the other way with the "who cares" comment. Who cares what the charges are if the end returns are good enough and the fund manager acts within his remit to protect against the downside as well as taking advantage of the upside.

P.S. You do notice that alot of the people advocating investing in these rip-off funds are IFA's, etc. i.e. people who are on the same gravy train as the overpaid fund managers.

Sounds a bit like an ad hominem fallacy to me (i.e. attempting to discredit those who are making an argument rather than addressing the argument itself).

Aegis

darkpool wrote: »

excellent post.

so it looks like trackers have a small PTR and the managed funds have a huge PTR. It really is criminal how the Total Expense Ratio doesn't cover total costs.

It's a bit like agreeing a price with a taxi driver to take you to your hotel then the driver wants an extra 20 quid for taking your luggage as well.

It was a good post if you use actual turnover rates, like the ones I just quoted. It shows that the funds mentioned have additional costs of around 0.1-0.2% for the Invesco Perpetual and M&G funds, a little more for the Fidelity fund and a reasonably considerable amount for the fund which outperformed its benchmark by a wide margin (i.e. beating the market and earning its fees).

darkpool

Largest holdings, 28-Feb-2011Holding(%)RankPrevFund factsheetEquity factsheetASTRAZENECA PLC8.651(1)-GLAXOSMITHKLINE7.552(2)-REYNOLDS AMERICAN INC6.543(3)--BG GROUP6.074(4)-BRITISH AMERICAN TOBACCO5.725(6)-VODAFONE GROUP5.336(5)-BT GROUP5.017(7)-ROCHE SA3.928(9)--TESCO3.749(8)-IMPERIAL TOBACCO GROUP3.74

top 10 holdings for perpetual high income. ehhhhmmmmm anyone really think a TER of 1.5% is worth it for holding ftse 100 shares?

we can all point at UTs that have a lower or higher PTR. But i think it safe to say that the average PTR is in the 100 to 200% range for actively managed funds.

darkpool

The average
turnover on US actively managed funds is between 70% to 90% per year, and
(though precise data are lacking) consultations with the fund management industry
and articles in the financial press indicate UK funds engage in a similar level of
turnover. 60

above is from the fsa website. so i think my guess of about 1.5% to add on to the TER is about right? i think turnover is higher for active management, but i assume that the above figures include low turnover trackers.

Aegis

darkpool wrote: »

Largest holdings, 28-Feb-2011Holding(%)RankPrevFund factsheetEquity factsheetASTRAZENECA PLC8.651(1)-GLAXOSMITHKLINE7.552(2)-REYNOLDS AMERICAN INC6.543(3)--BG GROUP6.074(4)-BRITISH AMERICAN TOBACCO5.725(6)-VODAFONE GROUP5.336(5)-BT GROUP5.017(7)-ROCHE SA3.928(9)--TESCO3.749(8)-IMPERIAL TOBACCO GROUP3.74

top 10 holdings for perpetual high income. ehhhhmmmmm anyone really think a TER of 1.5% is worth it for holding ftse 100 shares?

In the long run, yes. 5 year performance of the IP High Income fund: 20.58%.

5 year performance of the L&G UK 100 fund: 11.33%.

I'd rather have Neil Woodford manage that chunk of my cash than do it myself.

we can all point at UTs that have a lower or higher PTR. But i think it safe to say that the average PTR is in the 100 to 200% range for actively managed funds.

I pointed to the first 4 common unit trusts that I found in my portfolio that I found recent PTR data for. I didn't cherry pick in the slightest, these are funds I actually invest in and have made money from, and they are the four that I could actually be bothered finding the information for (searching through multiple hundred-page documents in PDF for one specific bit of data isn't much fun, after all). Had I gone on and picked all the funds in my portfolio, I'm sure you'd still say I was only pointing to lower-priced funds, however these are literally the first ones I found when I actually went out to find some data on my own portfolio.

So no, I don't think it's safe to say that actively managed funds fall into the 100-200% range. Especially when you look at some reports that came out when Fitzrovia published their research back in 2005 regarding the portfolio turnover rates of UK funds and found the average to be around 65%. If we crudely assume a normal distribution with a standard deviation of 30%, that would mean that 98% of fund PTRs fall in the range of 5-125%, with roughly 66% falling into the 35-95% range. This would still mean there are some high turnover rates but the quoted average PTR certainly rules out your claim that the average holding period for a share held by a unit trust is 6 months. It actually seems to be somewhere pretty close to a year and a half.

Aegis

Rollerball wrote: »

Exactly. A chimp could pick these stocks. People investing in funds are paying these jokers millions of pounds per year for doing the bleeding obvious.

Sure, a chimp could pick the stocks... A chimp could manage to outperform a FTSE tracker over a 5 year period by 9% using only stock selection while following the rules for unit trust/OEIC diversification and the mandate of the fund....

Clever chimp.

darkpool

Aegis wrote: »

Especially when you look at some reports that came out when Fitzrovia published their research back in 2005 regarding the portfolio turnover rates of UK funds and found the average to be around 65%.

65% of 1.8% dealing costs is 1.2%, not a million miles from my guess of 1.5%

So TER is typically 1.5%. So all expenses are near enough 3% a year?

jamesd

psychic_teabag wrote: »

Is it the same funds that beat the tracker year-on-year, or in any given period is it a random set of the active funds that beat the tracker ? If the latter, so that an active fund occupies a random place in the table each period, then maybe being consistently mid-table is no worse than hopping about the table randomly.

It's a mixture.

1. Some are consistently bad, like tracker funds with high charges operated by banks or insurance companies to a captive audience.
2. Some sectors are inherently better than others at different times. You wouldn't want to be holding a lot in a natural resources fund on the way into a major global recession but it'd be a great one to hold at the start of a recovery.
3. Funds change managers and management companies. Either of those can produce a substantial change in performance and it's not uncommon to switch out of a fund into another with known record until you see how the new manager or company does with it.

darkpool wrote: »

an interesting graph. does it include dividends though?

Yes. Both are total return.

darkpool wrote: »

the fund management industry owns circa 90% of the UK stockmarket. so when these financial professionals decide to sell shares who do they sell them to? they must sell them to other investment firms? so how can the overall UK fund management industry deliver above average returns? they are just playing "pass the parcel" with shares and taking 3% a year for doing it.

Even if the funds did exactly the same thing at exactly the same time the ones who have lower charges would do better. But the don't have equal performance, some managers do better than others. I don't mind trying to find the ones who do a better job and avoiding the ones who consistently do badly.

Rollerball wrote: »

Who cares. Even if it were 'only' 2% it would still be 2% too much.

Why should I care? All I need to care about is the end result and that's shown in the performance figures. If I'm paying 20% and still beating the best I could do elsewhere I'm still ahead. But if the fund isn't justifying that 20% in performance I'll switch to another one.

Rollerball wrote: »

P.S. You do notice that alot of the people advocating investing in these rip-off funds are IFA's, etc. i.e. people who are on the same gravy train as the overpaid fund managers.

The FSA has in the past restricted IFAs to only using packaged products. That has excluded ETFs and ITs from the products they can recommend, those being the domain of people authorised as stock brokers. You can claim that IFAs are greedy for recommending the only thing they have been allowed to recommend if you like but it seems better to blame the body that wouldn't let them do anything else: the FSA.