Fund managers

gadgetmind

Linton wrote: »

Sorry but it seems you have dug yourself into a hole: either it is possible to achieve results much better than a tracker over the long term

It's well documented that stock picking can work in some areas (yes, you can mathematically analyse individual stock picking skills), but why it's the fund managers who struggle to maintain this over the long term for a variety of reasons.

See Chapter 6 of "The Intelligent Asset Allocator" by William Bernstein, particularly the section "Alpha man to apeman".

I do a little stock picking with a small percentage of my portfolio (OK, so a couple of successes have made this a larger percentage of my portfolio than I'm happy with!) but for the rest is rapidly going passive.

jem16

darkpool wrote: »

ohh sorry, i thought you said "people who are good at their job make their own luck".

Exactly.....................................

darkpool

jem16 wrote: »

Exactly.....................................

so if someone gets cancer or aids it's because they aren't good at their jobs? how about murder victims? do you think if they were better at their job they wouldn't have been killed?

i agree that to a certain extent people make their own luck, but sometimes bad luck just happens to people.

JamesU

qpop wrote: »

Using software such as FE Analytics you can consistently identify OEICs and UTs that outperform their benchmark, whilst taking less risk. The idea that they only manage this by holding too much cash is ridiculous and inaccurate - this would make sense in a downturn but would result in underperformance when the benchmark was surging.

To name a few funds that consistently meet the above criteria:
Aberdeen Emerging Markets (closed)
First State Global Emerging Markets Leaders (open)
Veritas Global Equity Income (open)
Newton Asian Income (open)
Marlborough Special Situations (open)

If FE analytics can extrapolate this information, rather than cherry pick a few examples, it should be easy to confirm what % of the funds consistently outperform their benchmark index over a 3yr, 5yr and 10 yr period? Surely that is what an investor really needs to know in order to make an informed decision when setting up an asset allocation based on managed funds with higher charges, rather than taking a passive index approach at lower cost? From memory, less than 8% of funds provide above average performance over a three year period.

JamesU

jem16

darkpool wrote: »

so if someone gets cancer or aids it's because they aren't good at their jobs? how about murder victims? do you think if they were better at their job they wouldn't have been killed?

You're being a bit silly now - have you run out of sensible answers?

i agree that to a certain extent people make their own luck, but sometimes bad luck just happens to people.

But we weren't talking about bad luck were we?

jamesd

darkpool wrote: »

the average fund holds a share for about a year - not buy and hold.

Why should I care? My average holding time for one pot of money for the last couple of weeks has been measured in hours. During that time I've made a net tax free profit of around £4,000 using mainly the FTSE and Dow with a maximum of £25,000 available and most of the gains made with half of that available.

The holding times may have been short but it's been profitable.

I don't agree with those who have criticised your anecdotal returns. You've provided a nice example, just as my own history is a nice example of what can be done.

darkpool

jamesd wrote: »

Why should I care? My average holding time for one pot of money for the last couple of weeks has been measured in hours. During that time I've made a net tax free profit of around £4,000 using mainly the FTSE and Dow with a maximum of £25,000 available and most of the gains made with half of that available.

The holding times may have been short but it's been profitable.

I don't agree with those who have criticised your anecdotal returns. You've provided a nice example, just as my own history is a nice example of what can be done.

nice return! if you're making money from it you might as well stick to your method.

it seems a better method than some of the UT investors on this thread who pay high annual charges but get little in return.

gadgetmind

jamesd wrote: »

I don't agree with those who have criticised your anecdotal returns.

Anyone who doubts my returns can see copies of my contract notes as long as they will sign an NDA *and* agree to pay my share-related capital gains tax bill for the year in question.

I'm made this offer a few times over the years as and when doubters have emerged from under the 'fridge. So far no-one has yet taken me up on it, or even made a sporting bet regards what happens if I've been speaking with forked tongue.

It's like scrabble. Ones opponent might question that Syzygy is a word, particularly if played it on a triple, but there is a mechanism to question this that goes beyond raising an eyebrow and saying "Seriously do you ask me to belief this piffle!"

masonic

There was an interesting article in the Telegraph today on the subject of active vs. tracker funds. According to some research by Morningstar, the average managed UK fund has been underperforming the All-Share index, which is no surprise. However, more noteworthy is that the average UK index tracker has been performing even worse than the average UK managed fund...

Over the past seven years, the average actively managed UK fund has returned 49.2pc, according to Morningstar, the fund analyst. Over the same period, the FTSE All Share index has risen by 56pc (on a total return basis), while the average tracker fund has risen by 46.3pc.

Active managers also underperformed the index over five years, with returns of 4.3pc against 7.3pc. Trackers produced 4.1pc on average.

This goes to show any argument made on the basis of comparing averaged data against an index is going to be misleading, since consistently poor funds skew the average data of both types of investment.

gadgetmind

masonic wrote: »

been performing even worse than the average UK managed fund...

They go on the say that the average in managed funds masks the *huge* performance between them. (Trackers differ very little)

This is to be expected. Managed funds are a coin tossing contest. Do you feel lucky? Can you pick the winning fund, or might you instead get a motley collection of dogs?

And don't think that searching for a star manager, or using "recentism" and going for the sectors that have done well over the last few years (months!) will help, because statistical analysis shows that it won't.

Sorry.

If you want to take a fund flutter with a small percentage of your portfolio, then so be it: I'll probably do the same. But please use rational and mathematical/statistical reasoning to deduce what to do with the bulk.