Funds fees query

dunstonh

so the investors with passive managed funds are unlikely to be getting value for money? they are likely to be a lot worse off than someone with a tracker?

Yes. A point already made on this thread on earlier pages.

i've read that the stockmarket produces on average 7% a year. If active managment costs 2.5% a year I see no way how active management can outperform the stockmarket on average*.

So, how do you explain that around 50% of the funds in the sector are likely to outperform the trackers?

*average inlcudes all funds. not just the cherry picked ones.

Exactly. So, even if you foolishly left in the passive managed funds and then picked funds totally at random, you would stand around a 50/50 chance of picking one that will end up with better performance. The same odds as picking one that will end up with worse.

However, if you eliminate the passive managed (which will nearly all finish in the bottom half), you improve odds even with just a little research.

darkpool

jamesd wrote: »

Managed funds have different investment strategies. They inherently differ in performance at different times depending on how the manager views the economic situation and their ability level. Trackers should not be doing that. By using averages you're including the managed funds that have consistently poor management which wouldn't be selected by managed fund users given free choice and using that to penalise those with good management.

You've misquoted the FSA warning. It's not "previous performance is no guide to future performance", it's "The past performance of an investment is not a guide to future performance". There's a big difference in meaning between not a guide and no guide.

Even the flawed studies paid for by the FSA found that poor performance persisted and could be used as a guide to eliminating consistently poor performers. That shouldn't surprise anyone any more than not being surprised that most bank savings accounts pay low interest rates.

silly old me! imagine thinking i should include the poor returns of some active funds! obviously i should ignore all the dog funds and concentrate on the best performers.

ehhmmm ok. i wouldn't think there is that much difference between "not a guide" and "no guide".

flawed studies from the FSA? perhaps you should contact the FSA telling them why their studies are flawed? I'm sure they would be interested.

tbh in your case i think your right investing with a managed fund.

darkpool

kar999 wrote: »

I for one, as a risk based investor, would want to try and continue to seek out those 35% of funds that HAVE beaten the index.

you sound more like a gambler, and there's nothing wrong with that.

darkpool

cloud_dog wrote: »

Sorry but, this is an irrelevant statement.

This applies to all invesments not the vehicle they use.

another poster was saying that bad or good performance continues over the years. i was just pointing out the FSA thought differently.

darkpool

dunstonh wrote: »

So, how do you explain that around 50% of the funds in the sector are likely to outperform the trackers?

ehhhhmmmm luck? it has been suggested that only 35% of funds beat the market. i'll admit i'm no albert einstein, but does that mean 65% of managed funds underperform the market?

cloud_dog

darkpool wrote: »

another poster was saying that bad or good performance continues over the years.

Yes, I think thats a fair statment. Its a bit like interest rates...... they may go up, or down, or possibly stay the same.

darkpool wrote: »

i was just pointing out the FSA thought differently.

Sort of, they are just pointing out that past performance is no guarantee (which is pretty bloody obvious but I suppose it helps people with rose tinted glasses).

jimjames

darkpool wrote: »

ehhhhmmmm luck? it has been suggested that only 35% of funds beat the market. i'll admit i'm no albert einstein, but does that mean 65% of managed funds underperform the market?

I guess it depends over what timeframe. As far as I am aware the longer the time period the more likely they will underperform. The top dog over one year might have been the bottom of the pile over 10 years.

kar999

darkpool wrote: »

you sound more like a gambler, and there's nothing wrong with that.

Thanks!

But everyone who invests in the markets is a gambler.

Whether it's a passive tracker or an active fund it's still risk based and you could lose your shirt or make a mint with either, hence the FSA performance warnings.

Even many cash savings products are a gamble. To lock in at 5% for 5 years or not? Will the latest NS&I index linked certs return more?

darkpool

"F und managers are still failing to deliver any consistency in their investment performance, according to a new analysis of returns from more than a thousand funds – making it almost impossible for private investors to pick long-term winners.
Thames River Multi Capital (TRMC) has just produced its latest “consistency ratio”, which measures the proportion of funds in the 12 main fund sectors that have produced top quartile returns in each of the past three years.
This shows that only 16 out of the 1,188 funds in those sectors with a three-year track record – just 1.3 per cent – have been in the top 25 per cent for performance in three consecutive 12-month periods to the end of March 2011."

I got the above from the Financial Times. So out of 1188 funds only 16 had top quartile perfomance for three years running. In all honesty how stupid must managed fund investors be? 16 funds in the top quarter for three years running is what you'd expect from chance alone!!!!!!!!!

Lokolo

darkpool wrote: »

"F und managers are still failing to deliver any consistency in their investment performance, according to a new analysis of returns from more than a thousand funds – making it almost impossible for private investors to pick long-term winners.
Thames River Multi Capital (TRMC) has just produced its latest “consistency ratio”, which measures the proportion of funds in the 12 main fund sectors that have produced top quartile returns in each of the past three years.
This shows that only 16 out of the 1,188 funds in those sectors with a three-year track record – just 1.3 per cent – have been in the top 25 per cent for performance in three consecutive 12-month periods to the end of March 2011."

I got the above from the Financial Times. So out of 1188 funds only 16 had top quartile perfomance for three years running. In all honesty how stupid must managed fund investors be? 16 funds in the top quarter for three years running is what you'd expect from chance alone!!!!!!!!!

You don't see United winning the FA Cup / League title / Champions League every year running ya know