A good Emeging Markets Tracker???

wriggly

Another tracker is Vanguard Emerging Markets Stock Index with a 0.55% TER, but 0.4% charges on way in and way out, plus you typically need to pay platform charges on the few platforms that have it available (e.g. Alliance Trust Savings).

psychic_teabag

In post #10 of this thread the ex-manager of an emerging fund comes down on the side of trackers.

masonic

psychic_teabag wrote: »

In post #10 of this thread the ex-manager of an emerging fund comes down on the side of trackers.

Anyone who believes in passive funds should not be taking the advice of an active fund manager.

temagami

I'd agree with much of what he says in that thread. You're probably going to do better in your average emerging market tracker than in your average emerging market active fund.

The average managed fund will always underperform the index because of increased costs. And far too many don't even try to do anything significantly different from the index anyway - for many managers, it's not worth the career risk.

But the ones that do take out-of-consensus decisions - for example those that make a conscious decision to avoid the EM conglomerates mentioned where the controlling shareholder coinvests the listed company and his private company in a property deal on terms that are rather better for the private company than the minorities of the public company - can produce significantly better returns.

You need to identify those managers, which is not altogether easy - but that (or managing your own portfolio of EM stocks - which requires a lot more work) is the way to get better long-term returns from EMs.

wriggly

masonic wrote: »

Anyone who believes in passive funds should not be taking the advice of an active fund manager.

If someone believes (and presumably invests) in passive funds, how could they act on new advice to use passive funds?

I think this advice is targeted at "believers" in active funds.

masonic

wriggly wrote: »

If someone believes (and presumably invests) in passive funds, how could they act on new advice to use passive funds?

I think this advice is targeted at "believers" in active funds.

My comment was tongue-in-cheek: advice from an active manager to go passive will put off the passive investors.

On a more serious note, many fallacious 'anti-managed' comments are made on the basis of probability. The fact is people who opt for managed funds do not (or should not) pick their funds at random. Providing at least one overperforming manager exists in a sector AND they can be identified, the argument for going managed is as strong as it is for any other sector of the market. On that basis, the arguments raised in that thread, which all relate to the balance of probabilities, are largely of no consequence.

wriggly

masonic wrote: »

On a more serious note, many fallacious 'anti-managed' comments are made on the basis of probability. The fact is people who opt for managed funds do not (or should not) pick their funds at random. Providing at least one overperforming manager exists in a sector AND they can be identified, the argument for going managed is as strong as it is for any other sector of the market. On that basis, the arguments raised in that thread, which all relate to the balance of probabilities, are largely of no consequence.

All investment is based on probability. It is not unlike gambling, except that in gambling all the money is coming from other gamblers. In investing, some of the money comes from somewhere else (generally, the profits of businesses), and this provides a positive expected average return, which is where investment differs from gambling.

It is likely that some active managers will outperform the sector average, simply because they are randomly distributed around the average. The big if in your statement is providing "they can be identified" in advance. Proponents of passive investing believe the statement "past performance does not predict future performance".

Ark_Welder

Whether the route is active or passive, the correct route is the one that the investor is most comfortable with.

masonic

wriggly wrote: »

All investment is based on probability. It is not unlike gambling, except that in gambling all the money is coming from other gamblers. In investing, some of the money comes from somewhere else (generally, the profits of businesses), and this provides a positive expected average return, which is where investment differs from gambling.

You have completely missed my point. Investment is not about picking at random, it is about carefully selecting investments on the basis of the available information and in line with your own criteria. When gambling, picking at random normally makes no difference. A 'lucky dip' on the lottery has just as much chance of coming up as any other set of numbers someone could choose. However, when investing, people should not be picking funds at random. Any argument making the assumption that people select their investments at random is fallacious.

It is likely that some active managers will outperform the sector average, simply because they are randomly distributed around the average. The big if in your statement is providing "they can be identified" in advance. Proponents of passive investing believe the statement "past performance does not predict future performance".

I know what passive investors believe, and it goes more like "it is impractical to consistently outperform the market". People can either agree or disagree with that, or agree with it in some sectors but not others. However, this is not relevant to the comment that was made about the emerging market sector having a much larger proportion of funds that underperform relative to an index tracker.

In other words, the dice are loaded against the investor in emerging markets. Let's examine that statement from both sides of the fence: if you are a passive investor - you don't believe you can beat the market anyway, so the comment is largely irrelevant; if you are a 'managed' investor, then you believe you can identify funds that outperform the market, so while you may have more funds to sift through, the comment is largely irrelevant.