Funds fees query

kar999

darkpool wrote: »

I got the above from the Financial Times. So out of 1188 funds only 16 had top quartile perfomance for three years running. 16 funds in the top quarter for three years running is what you'd expect from chance alone!!!!!!!!!

I think if you read back, one of my posts refers to active funds not being able to beat indexes in a straight consistant basis but they can beat them over a specific tiime frame by HUGE amounts. That's because they are actively managed into specialised areas that will go up or down in a different cycle to the general all encombasing index. Just one example... but if you'd have invested in an active China fund for the last 20 years you'd be a millionaire now. In an index tracker you'd probably barely have much more than your original your money back.

In all honesty how stupid must managed fund investors be?

Completely the opposite from stupid I'd say. Any intelligent savvy active fund investor picks and choices their active funds in any given specialist sector given the prevaling circumstances rather than blindly leaving them to chance or the vagracies of the market which is what index trackers do.

darkpool

Lokolo wrote: »

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

1200 funds, so 300 funds will be in the top quarter at the end of year 1.

By chance alone you'd expect 75 of these 300 funds to be in the top quarter at the end of year 2.

By chance alone you'd expect 17 of these 75 funds to be in the top quarter at the end of three years.

The data from the FT strongly suggests that fund performance is down to chance......Unless you see the data differently?

Lokolo

darkpool wrote: »

1200 funds, so 300 funds will be in the top quarter at the end of year 1.

By chance alone you'd expect 75 of these 300 funds to be in the top quarter at the end of year 2.

By chance alone you'd expect 17 of these 75 funds to be in the top quarter at the end of three years.

The data from the FT strongly suggests that fund performance is down to chance......Unless you see the data differently?

Did you only read the first paragraph?

Nevertheless, these recent results are all well below the long-term average range of 2 to 5 per cent – and well below the best ever consistency ratio of around 7 per cent.

So basically you are only looking at the latest results, whereas I have decided to read on and look at results previously. Which shows the latest report has been lower than the usual, but that's not surprising given the ever changing environment we have been in for the last few years.

I also wonder what this has to do with Trackers vs. Managed because trackers do not have consistency because all they do is follow the index, which as we all know, has no consistency!

darkpool

kar999 wrote: »

I think if you read back, one of my posts refers to active funds not being able to beat indexes in a straight consistant basis but they can beat them over a specific tiime frame by HUGE amounts. That's because they are actively managed into specialised areas that will go up or down in a different cycle to the general all encombasing index. Just one example... but if you'd have invested in an active China fund for the last 20 years you'd be a millionaire now. In an index tracker you'd probably barely still have only your original your money back.



Completely the opposite from stupid I'd say. Any intelligent savvy active fund investor picks and choices their active funds in any given specialist sector given the prevaling circumstances rather than blindly leaving them to chance or the vagracies of the market which is what index trackers do.

the data is nothing to do with indexes. it's comparing active funds against other active funds.

The data from the FT shows that full time fund managers don't have consistent performance. These guys do the job full time and have research tools and access to the board of directors of potential investments. Yet you suggest an amateur fund picker has the ability to pick funds that outperform?

darkpool

Lokolo wrote: »

Did you only read the first paragraph?



So basically you are only looking at the latest results, whereas I have decided to read on and look at results previously. Which shows the latest report has been lower than the usual, but that's not surprising given the ever changing environment we have been in for the last few years.

I also wonder what this has to do with Trackers vs. Managed because trackers do not have consistency because all they do is follow the index, which as we all know, has no consistency!

It also says "At the end of last year, just 0.7 per cent of funds managed top-quartile positions in all three of the previous years. Nevertheless,"

Ouch!!!! Imagine paying 2.5% a year for that!

jem16

darkpool wrote: »

The data from the FT shows that full time fund managers don't have consistent performance. These guys do the job full time and have research tools and access to the board of directors of potential investments.

You misunderstand the remit of a fund manager. In any 5 year cycle you will have different sectors that perform well - i.e. one year it could be small cap, others mid cap, others recovery funds etc. The fund manager cannot change the basic remit of his fund. If he is in UK Equity Income that's what he must stay in - he cannot jump over to something else just because that's doing better.

Yet you suggest an amateur fund picker has the ability to pick funds that outperform?

The investor has the choice to move between funds that are doing better in that particular part of the cycle - the fund manager does not.

kar999

darkpool wrote: »

The data from the FT shows that full time fund managers don't have consistent performance. These guys do the job full time and have research tools and access to the board of directors of potential investments. Yet you suggest an amateur fund picker has the ability to pick funds that outperform?

Yes precisely. I can chose to be in a commodities fund today but not tomorrow. A commodity fund manager runs a commodity fund and can only maintain that fund in commodites. He can't suddenly use it to buy gilts!! His fund will beat the index by a country mile if commodities are bullish but it will fall like a stone if the bubble bursts. Then investors, amateurs and professionals will buy those underperforming funds at the bottom of the market hoping to take a significant profit on the upside.

This isn't rocket science and trying to bring the argument of active v passive in general terms down to just chance and the law of averages is futile as it's like comparing apples and pears.

Edit: Jem 16 has posted much the same answer above as I was writing!!

darkpool

jem16 wrote: »

You misunderstand the remit of a fund manager. In any 5 year cycle you will have different sectors that perform well - i.e. one year it could be small cap, others mid cap, others recovery funds etc. The fund manager cannot change the basic remit of his fund. If he is in UK Equity Income that's what he must stay in - he cannot jump over to something else just because that's doing better.



The investor has the choice to move between funds that are doing better in that particular part of the cycle - the fund manager does not.

if a fund manager was any good would he not persistently outperform his peers? i believe the funds are measured against it's specific fund sector (there are 12 fund sectors).

Lokolo

darkpool wrote: »

if a fund manager was any good would he not persistently outperform his peers? i believe the funds are measured against it's specific fund sector (there are 12 fund sectors).

The research hasn't been split into sectors and they are not comparing the funds to each other in each sector.

TRMC’s research throws up some other surprising findings. In six of the 12 IMA sectors studied – Sterling Corporate Bond, Sterling Strategic Bond, Asia ex-Japan, Japan and North America – not a single fund achieved top quartile performance in all three years.

They have taken a sample of funds from each sector and are comparing them to one another.

And you can see in the above quote that none of these were in the top quartile, which shouldn't be a surprise to anyone given the recent times in those areas.

However I suspect that funds such as commodities will be the ones that are in the top quartile.

You cannot expect one area to consistently do well throughout X period of time.

dunstonh

TRMC’s research throws up some other surprising findings. In six of the 12 IMA sectors studied – Sterling Corporate Bond, Sterling Strategic Bond, Asia ex-Japan, Japan and North America – not a single fund achieved top quartile performance in all three years.

And you wouldnt expect them to. The last 3 years have included a major drop, a major increase and a volatile but increasing year.

To expect funds to remain consistent in top quartile position would be wrong. the higher risk funds will typically be top in the growth periods and bottom in the periods of decline.

Which brings us back to the frequently commented on (and largely ignored) point that managed funds with their own objectives are not the same as funds designed to track a benchmark and therefore you should not expect them to behave in the same way.

If you are a lazy investor, then picking managed single sector funds is not a good idea. If you are an active investor then considering active managed funds is a good idea.