Funds fees query

talexuser

I remember we had this argument in the papers years ago when Virgin launched it's index tracker, showing stats that many if not the majority of active funds failed to beat their index.

I was tempted but the Virgin costs was high compared to other trackers, so decided to gamble and stick with good reputation active funds over the years, give them a good chance to perform but swap if they went sideways too long. I stayed in during the dips and am way ahead of index funds after 16 years.

Incidentally Perp Hi Inc is the only fund I have never swapped from original PEP 15 years ago, since it has outperformed well even through a couple of periods of Woodford's relative underperformmance. I've been impressed with him ever since he blew the whistle on the British Biotech bubble years ago, while everyone else was still saying buy a worthless stock.

Yes, active is a gamble, but it doesn't require full time research to pick the likely winners, and after swapping some losers you are still likely to be ahead IMHO if you have a spread. If you don't like that "risk" stick with trackers but there is still plenty of risk of economic dips nevertheless.

kar999

darkpool wrote: »

many funds beat trackers? by implication you are saying many don't?

active funds beat trackers in some years? maybe this is due to chance?

there is little evidence to support active management beating trackers. yes some funds will beat trackers, but overall they don't.

There isn't a right and wrong answer to this debate. As I said horses for courses. Some active funds will beat trackers and vice versa... some of the time.

Here is an interesting article with some evidence of support (and to echo my comment, it also contains evidence the other way.)

.....But it is also worth pointing out that when active managers do outperform, the gains can be spectacular. According to Bestinvest, the best-performing funds of the past decade have produced returns that dwarf those of the index.

Stock-market-tracker-funds-take-a-tumble
http://www.telegraph.co.uk/finance/personalfinance/7748561/Stock-market-tracker-funds-take-a-tumble.html

Trying to argue one is better than the other is completely futile as to some degree you are trying to compare apples with pears. There are far too many variables for anyone to prove the point or win this debate.

Time to move on.... Life to live and money to be made!

darkpool

talexuser wrote: »

Yes, active is a gamble, but it doesn't require full time research to pick the likely winners, and after swapping some losers you are still likely to be ahead IMHO if you have a spread. If you don't like that "risk" stick with trackers but there is still plenty of risk of economic dips nevertheless.

but due to the extra fees managed funds underperform trackers

i just don't like the active fund industry implying they outperform the market when they don't.

Lokolo

darkpool wrote: »

but due to the extra fees managed funds underperform trackers

i just don't like the active fund industry implying they outperform the market when they don't.

I don't understand why you keep saying this? The performance WILL INCLUDE ALL THE FEES.

If the returns are still massively greater - then why does it matter how high the fees are???

300% with 10% fees is still 300%, the return INCLUDE ALL THE FEES.

No-one is saying ALL managed funds beat trackers, but a lot do, and you seem to think that trackers beat managed, which is entirely untrue, it depends on the individual funds you are looking at.

dunstonh

but due to the extra fees managed funds underperform trackers

Apart from those that do not.

It isnt the fees that make them underperform or over perform. its the different investment strategy.

darkpool

dunstonh wrote: »

It isnt the fees that make them underperform or over perform. its the different investment strategy.

ehhhmmmm ok, you think fees have no bearing on fund performance? if they put TER to 20% it wouldn't make a difference?

If i paid for advice like that i'd feel short changed.

darkpool

Lokolo wrote: »

I don't understand why you keep saying this? The performance WILL INCLUDE ALL THE FEES.

If the returns are still massively greater - then why does it matter how high the fees are???

300% with 10% fees is still 300%, the return INCLUDE ALL THE FEES.

No-one is saying ALL managed funds beat trackers, but a lot do, and you seem to think that trackers beat managed, which is entirely untrue, it depends on the individual funds you are looking at.

research "zero sum game" on google. then think about it THEN post.

psychic_teabag

kar999 wrote: »

But it is also worth pointing out that when active managers do outperform, the gains can be spectacular. According to Bestinvest, the best-performing funds of the past decade have produced returns that dwarf those of the index

The tricky part is knowing in advance which funds will be spectacular - it's all too easy in hindsight :-(

kar999

Absolutely... but that's half the interest for me, in picking and chosing, by being an "active" investor in "active" funds. Stocks and shares are not for the risk adverse and that applies to both index trackers as well as active funds.

There is also what trackers to pick if you persue the passive fund route. Glencores recent floation is a classic example of that recently. If you think the commodity bubble is about to burst then FTSE 100 trackers now have an incresed exposure which an active fund could avoid.

More here.... http://www.ftadviser.com/InvestmentAdviser/Investments/NewsAnalysis/article/20110523/d039729a-814e-11e0-8195-00144f2af8e8/John-Lappin-Glencore--derailing-passive-funds.jsp

Glencore - derailing passive funds?
Glencore strikes me as representing a curious case of investing with a blindfold on - if you're a passive investor that is.
Jupiter's Tony Nutt and Psigma's Bill Mott have both questioned the FTSE's mining bias. Invesco Perpetual's Neil Woodford has warned of making too much of a commodity play based on Chinese demand.

talexuser

darkpool wrote: »

but due to the extra fees managed funds underperform trackers

I'm afraid not true for the total returns of the various income acc funds I've had for 16 years since the days of peps compared to the index over that time.