Funds fees query

dunstonh

Do you not have a bias? After all a lot of your salary will come from trail commission?

Most of my income comes from agreed remuneration. The remuneration is paid whether I use trackers or managed funds or ETFs or whatever. I have no bias and I have made it clear a number of times that you should use a tracker when the objective is right and use a managed fund when the objective is right. I don't know how you can be more balanced than that.

jamesd

darkpool wrote: »

if fund managers had skill would they not be able to be in the top quartile each year? once again someone is using individual funds as proof that active management is worth the fees.

Nope, I was illustrating your misunderstanding and you've confirmed that you still fail to understand why the volatility filter that the FT columnist didn't mention matters, or do understand it and are trying to ignore it.

Standard understanding is that the more return you want, the more risk (volatility) you must accept. So the expected result is that the top quartile performers have bottom quartile volatility.

The FT's columnist used a study that threw out all those that didn't have both top quartile performance and top quartile volatility. He was effectively seeking proof that the higher returns require higher risk theory is false.

So no, a skilled fund manager should not be expected to be in the top quartile for both performance and volatility each year, because it's fundamental that higher performance is associated with higher volatility - in part by growing more than the average fund in the sector and hence having higher volatility than that average fund.

xiox

kar999 wrote: »

So if you'd have invested in FTSE 100 tracker for the last 10 years you'd be happy with next to no return on your investment?

Most of the returns on the stockmarket usually come from dividends, so the FTSE chart isn't very helpful. The HSBC FTSE 100 tracker has gained 20% over 5 years, even though the index has been static.

There is no guarantee of a return >0% for a fund. How can you choose which fund or fund sector is going to do well in the next 5 or 10 years? The best way to get best performance is to keep charges to a minimum - a tracker.

dunstonh

How can you choose which fund or fund sector is going to do well in the next 5 or 10 years?

That question applies to trackers as much as it does managed. Diversification has little to do with tracker vs managed.

darkpool

jamesd wrote: »

Nope, I was illustrating your misunderstanding and you've confirmed that you still fail to understand why the volatility filter that the FT columnist didn't mention matters, or do understand it and are trying to ignore it.

Standard understanding is that the more return you want, the more risk (volatility) you must accept. So the expected result is that the top quartile performers have bottom quartile volatility.

The FT's columnist used a study that threw out all those that didn't have both top quartile performance and top quartile volatility. He was effectively seeking proof that the higher returns require higher risk theory is false.

So no, a skilled fund manager should not be expected to be in the top quartile for both performance and volatility each year, because it's fundamental that higher performance is associated with higher volatility - in part by growing more than the average fund in the sector and hence having higher volatility than that average fund.

i'll be honest, i've no idea what point you are making. but you say a skilled manager should not be expected to be in the top quartile? what quartile should a top manager be in?

kar999

xiox wrote: »

There is no guarantee of a return >0% for a fund. How can you choose which fund or fund sector is going to do well in the next 5 or 10 years? The best way to get best performance is to keep charges to a minimum - a tracker.

It's not that difficult to beat trackers. Going back to the opening post, Perpetual High Income, which is a fund I have held for 20 years, wins hands down and has given me superlative returns even after higher charges.

This fund has successfully out-performed the FTSE 100 by 25% over 5 years and a staggering 150% over 10 years. It is difficult to deny that Neil Woodford’s stock choices are adding value and his foresight and general feel for the economy is very successful.

Aegis

darkpool wrote: »

i'll be honest, i've no idea what point you are making. but you say a skilled manager should not be expected to be in the top quartile? what quartile should a top manager be in?

Please try reading the rest of the sentence that you bolded...

kar999

I dont recall anyone (monkeys or otherwise) in this thread posting about predicting the economic cycle.

darkpool

kar999 wrote: »

I dont recall anyone (monkeys or otherwise) in this thread posting about predicting the economic cycle.

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.

dunstonh

so how come the credit crisis was not forecast? all those central banks, stockbrokers, investment banks didn't see the crisis coming. yet people are coming on this thread saying they can forecast the economic cycle?

Who is saying they can forecast an economic cycle?