Help me rebalance my failing S&S ISAs Portfolio - Sept 2011

Aegis

Rollinghome wrote: »

You seem to misunderstand what a "closet tracker" is. Holding stocks for the long term does not make a fund a closet tracker. Warren Buffet famously holds stocks for the very, very long term but that does not make him a closet tracker either.

Nor does the ability to constantly churn a portfolio necessarily give a fund manager an advantage as you seem to assume. Churning pfs can add 2% or more to costs - over and above both the quoted AMC and the TER and which is not revealed to investors in the UK. Neil Woodford has been more successful than many with the help of a low churn rate.

You also, as usual, conveneniently overlook the very much higher charges of managed funds in the UK compared with those in the US which makes the argument against them stronger. Retail managed unit trusts in the UK are extraordinarily expensive.

As a member of the absolutist pro managed fund Taliban, it would be appreciated if you made your vested interest, and that of your employer, clear. Managed funds have an advantage to most IFAs whether they are commission based, with many trackers not paying them commission, or fee based, where managed funds give them the opportunity to justify their high ongoing fees for "reviewing" and churning funds in a way that tracker funds don't.

As it happens I don't own any tracker funds and prefer to avoid all retail unit trusts whenever possible but I do recognise that for very many people they make the most sense. Many like to pretend that they, unlike ordinary mortals, have the knack of picking the "best funds". Most don't.

Certainly not for all, but for many, if not most, a tracker makes far more sense than the constant switching to last year's winners in a vain attempt to beat the markets we see on this board.

It would help if we could have more objective discussions of the subject rather than the slanted absolutist waffle of vested interests we tend to get here whenever the subject crops up.

I'd bother to respond, but last time you addressed me you called me a liar with no evidence and refused to apologise. As such, I don't feel you're worth the effort.

If anyone else wants my answer to any of the points raised by Rollinghome, please let me know and I'll respond to you.

darkpool

Ark_Welder wrote: »

Dear oh dear. More selective edits? For those that do not have a logon, the concluding two paragraphs from the FT article are as follows:

The article in its entirety does "prove" something, but it ain't anything to do with active or passive investing.

but the article says that there is little evidence managers can outperform the benchmarks, they also found little evidence of performance persistance.

if active management worked would you not expect funds consistently outperforming the benchmarks?

kar999

Deja Vu.... I see the old active fund, cheap trackers and fees debate is alive and well. I'm sure this forum would be half the size if we deleted the circular argument posts.

I recently bought some ETF trackers at 5400 and then again at 5100 at what I thought was, at both times, the market bottoming out...... wrong... I'm sure they'll recover but I'm ditching that strategy and going back to my old tried and tested more properous strategy of hand picked active managed funds with the "prospect" of buying at bargain prices and "potential" significant growth. Hopefully they will far outweighing any meagre tracker fund fee savings and against a backdrop of what could well be a very long haul in index recovery from possibly even lower positions to come.

darkpool wrote: »

.......if active management worked would you not expect funds consistently outperforming the benchmarks?

Yes!!....Here is one fund write-up that caught my eye today.... Cavendish Opportunities

The £49m Cavendish Opportunities fund is a top-quartile performer over one-, three-, five- and 10-year periods. It has returned 156.28 per cent in the last decade, outperforming its FTSE Small Cap ex IT benchmark by more than 115 per cent.

http://marketing.financialexpress.net/rp//248/process.clsp?t=250663B10C30FD82F47FE67A42D77B79C

I'm also glad my portfolio is overweight in Invesco Perpetual High Income Fund which has only fallen less than 1% (-0.34%) net of fees this tax year compared with massive double digit typical FTSE 100 tracker falls.



(Credit Invesco Perpetual)

darkpool

kar999 wrote: »

Here is one fund write-up that caught my eye today.... Cavendish Opportunities

The £49m Cavendish Opportunities fund is a top-quartile performer over one-, three-, five- and 10-year periods. It has returned 156.28 per cent in the last decade, outperforming its FTSE Small Cap ex IT benchmark by more than 115 per cent.

There are thousands and thousands of unit trusts in the UK. So the chances are that some of them will in the top quartile for different time periods.

If you get a thousand people to toss a coin 10 times the chances are one person will get heads on all 10 tosses, you think that person has a unique skill? Or do you think it chance?

The overwhelming evidence is that in aggregate AM is not worth the fees

masonic

darkpool wrote: »

but the article says that there is little evidence managers can outperform the benchmarks, they also found little evidence of performance persistance.

if active management worked would you not expect funds consistently outperforming the benchmarks?

It's managers, not funds, they should be looking at. It's managers that make a fund successful or otherwise and many of them don't stick with an individual fund for long enough to judge performance persistence on the basis of the fund itself.

I want to believe the ideology behind passive investing, but my personal experience is that my managed funds seem to have done better than my trackers.

Aegis

darkpool wrote: »

There are thousands and thousands of unit trusts in the UK. So the chances are that some of them will in the top quartile for different time periods.

If you get a thousand people to toss a coin 10 times the chances are one person will get heads on all 10 tosses, you think that person has a unique skill? Or do you think it chance?

The overwhelming evidence is that in aggregate AM is not worth the fees

And yet whenever you are asked for this overwhelming evidence you don't want to post it. Last time you said you were too busy and had to head out, but you've been back and have typed up a lot of posts since then. More often your only real evidence is that there isn't overwhelming strong evidence to the contrary, which isn't evidence for your side, it's just a lack of evidence.

In addition, people have pointed out that if you only look at aggregate date for all funds in a sector (excluding trackers) then you include the ones which are essentially passive funds with active charges and funds from management houses renowned for producing low quality and high cost investments (which certainly do exist and can usually be summed up as "retail bank investment funds). There are no studies carried out on active management once you exclude the passive strategies and the managers known for poor quality investment funds, so it's impossible to state that active management isn't worth the cost, which is certainly what you strongly imply in various other posts.

In fact, it's pretty bizarre that you come to the conclusion "most research shows active fund management isn't worth it" when you then later clarify that you actually meant that "in aggregate AM is not worth the fees", especially when you disparage people here for selecting active management fund selection based on criteria other than "pick a fund at random from the aggregate set of active funds within a given sector".

Do you have time to present your evidence from UK sources today?

kar999

We've been here before.... same old argument ... same old answers. It's horses for courses with no definitve answer as one size will never ever fit all.

There are rich pickings for active investors that trackers cannot ever match. I'm pleased to say my selection AFTER FEES has beaten the index by a country mile recently and I'm the richer by a few thousand pounds. I could have been thousands poorer with the wrong selections. My ETF trackers have lost me a couple of grand in as many weeks. So yes, investing, even in cheap trackers, is just as much of a gamble and in my case has cost me.

I'd rather put the time in and be a richer active selector making my hard earned cash work hard for me than a tracker sheep following the herd to save a few bob on fees.

darkpool

Aegis wrote: »

And yet whenever you are asked for this overwhelming evidence you don't want to post it. Last time you said you were too busy and had to head out, but you've been back and have typed up a lot of posts since then. More often your only real evidence is that there isn't overwhelming strong evidence to the contrary, which isn't evidence for your side, it's just a lack of evidence.

In addition, people have pointed out that if you only look at aggregate date for all funds in a sector (excluding trackers) then you include the ones which are essentially passive funds with active charges and funds from management houses renowned for producing low quality and high cost investments (which certainly do exist and can usually be summed up as "retail bank investment funds). There are no studies carried out on active management once you exclude the passive strategies and the managers known for poor quality investment funds, so it's impossible to state that active management isn't worth the cost, which is certainly what you strongly imply in various other posts.

In fact, it's pretty bizarre that you come to the conclusion "most research shows active fund management isn't worth it" when you then later clarify that you actually meant that "in aggregate AM is not worth the fees", especially when you disparage people here for selecting active management fund selection based on criteria other than "pick a fund at random from the aggregate set of active funds within a given sector".

Do you have time to present your evidence from UK sources today?

i can't remember, but do you not work in the fund management industry? if you do some might consider you biased.....

yeah, i did have to head out. what's the point of having one of the best shotguns in the world if i don't use it?

so if active management is soooooo good why can you AM employees not present some evidence? what a selling point it would be if fund managers could proof they could outperform the market? without the evidence it makes you look like your adverts are all spin.

PS i think i did put some evidence up that showed AM was for[STRIKE] mugs [/STRIKE]less sophisticated investors

masonic

darkpool wrote: »

so if active management is soooooo good why can you AM employees not present some evidence? what a selling point it would be if fund managers could proof they could outperform the market? without the evidence it makes you look like your adverts are all spin.

Last time I checked, there was no compelling evidence either way. There is no evidence that, after charges, it is always better to have a portfolio of trackers vs. managed funds or vice versa.

kar999

darkpool wrote: »

so if active management is soooooo good why can you AM employees not present some evidence? what a selling point it would be if fund managers could proof they could outperform the market? without the evidence it makes you look like your adverts are all spin.

PS i think i did put some evidence up that showed AM was for[STRIKE] mugs [/STRIKE]less sophisticated investors

I'm not an employee but I posted examples of 2 funds above which have outperformed the market. No random coin tossing involved but simple active selection.

As for your comments about evidence that AM being for mugs/less sophisticated investors then I'm happy to be called a rich mug anyday. It's better than being a prize coin !!!!!!!!

You earns your money and makes your choice.