Fund managers

darkpool

masonic wrote: »

I had considered the same thing. However, the comparison period shouldn't matter when comparing the trackers against the index. I think the trackers should have performed better than they did. Am I wrong to think so?

An interesting presentation of a familiar theme. On the whole, active managers don't seem to be very good at their jobs. I don't think there is any disputing that. However, they aren't all bad - I don't think anybody disagrees there either. The point of contention is whether one can top-slice, bottom-slice or otherwise improve ones chances of identifying the better managers, or indeed whether there is a formula or process for identifying them. I hold trackers in several sectors, so clearly I don't think I can do so in those sectors. In other sectors I have more confidence. It'll be at least another 10-15 years before I know if I am right or wrong on my calls, but so far I have made a good start.

i have seen other evidence that trackers beat managed funds. i think over longer periods trackers show their superiority.

"Historically, the majority of managed funds have failed to even equal, let alone "beat" passive index tracking funds. For example, one of the top performing United States funds over the last 20 years has been the Vanguard Standard and Poors 500 index fund, only a handful of the thousands of active funds available to the public have equalled or surpassed its return, and those that have have managed to do so only by a small margin."

I think if managers had any real skill the figures would show it. In my previous post I presented evidence that monkeys could run a UT better than fund managers. Even if some fund managers were good I would doubt they would outperform the benchmark by the costs they charge.

gadgetmind

masonic wrote: »

That is a tricky question to answer.

Yes, it is. Only be looking at long term returns from various strategies can we see what works best.

masonic

thelawnet wrote: »

An assertion with no supporting evidence, ok.

The assertion was made by another poster (paraphrasing the article). I merely repeated it, unless you are referring to my comment about trackers doing worse than managed funds on average (which is supported by the data in the article).

They do?

My comments refer to the data in the article, which is only based on UK funds over the time periods indicated. That data shows a significant underperformance. I was at odds to rationalise it.

Well it's typically (for a journalist) imprecise.

All articles on the subject seem to be either imprecise or misleading .

'the average tracker fund '

What is the 'average tracker fund'? Overpriced crap sold to captive pension fund holders? Does it include all kinds of trackers or only FTSE All Share trackers?

One has to assume UK trackers of some sort. Beyond that I don't know.

Personally I think I suspect it's a lot of rubbish:

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

Eh? Trackers returned 4.1% versus 7.3% for the index? Impossible I say - unless the 'trackers' were not all tracking the same thing.

This is the bit I was struggling to understand. You could be right that they have bundled together any tracker holding UK investments, but the same mistakes are applied to analyses of managed funds. None of it holds up to proper scrutiny, which was part of my reason for posting it.

In which case what's the point of this article? They can choose a different index, the FTSE 350 or something and use it to come to different conclusion.

The only thing that matters is the average tracking error for trackers, since trackers publish their costs, and you have the freedom to choose a cheaper tracker instead of a more expensive one..... So we just add 'average tracking error' to TER, and that's what we need to know. Then we compare the average return of the index, minus TER and tracking error, with the average return of managed funds. Not this nonsense about the 'average tracker', implying they are tracking very badly, which isn't the case.....

Exactly. 'Average tracker' is as bad as 'average managed fund' in that respect. These sorts of studies need to be taken with a large pinch of salt since they can be made to show whatever the author happens to be looking for.

masonic

gadgetmind wrote: »

Yes, it is. Only be looking at long term returns from various strategies can we see what works best.

Hence my comment to Darkpool about needing another 10-15 years to see if I made the right calls.

masonic

darkpool wrote: »

I think if managers had any real skill the figures would show it. In my previous post I presented evidence that monkeys could run a UT better than fund managers. Even if some fund managers were good I would doubt they would outperform the benchmark by the costs they charge.

There are examples of managers who have done this. What is disputed is whether anyone was able to spot them (without just being lucky).

darkpool

masonic wrote: »

There are examples of managers who have done this. What is disputed is whether anyone was able to spot them (without just being lucky).

tbh i think if anyone here had the ability to spot the 0.1% of (lucky?) managers who delivered alpha over decades they would be better researching shares and investing directly.

i'd imagine the ftse100 will be lucky to gain 5% a year in the next decade. that means a fund manager would have to make a gross 8% just to match the index. it's possible, but unlikely.

masonic

darkpool wrote: »

tbh i think if anyone here had the ability to spot the 0.1% of (lucky?) managers who delivered alpha over decades they would be better researching shares and investing directly.

i'd imagine the ftse100 will be lucky to gain 5% a year in the next decade. that means a fund manager would have to make a gross 8% just to match the index. it's possible, but unlikely.

It's certainly true that these are likely to be testing times for active managers. If you are right then I could well be converting all of my managed funds into trackers during the next few years. Don't worry, I won't be afraid to let you know if and when that happens.

Linton

darkpool wrote: »

i have seen other evidence that trackers beat managed funds. i think over longer periods trackers show their superiority.

"Historically, the majority of managed funds have failed to even equal, let alone "beat" passive index tracking funds. For example, one of the top performing United States funds over the last 20 years has been the Vanguard Standard and Poors 500 index fund, only a handful of the thousands of active funds available to the public have equalled or surpassed its return, and those that have have managed to do so only by a small margin."

I think if managers had any real skill the figures would show it. In my previous post I presented evidence that monkeys could run a UT better than fund managers. Even if some fund managers were good I would doubt they would outperform the benchmark by the costs they charge.

You still havent got it!! You are putting forward "evidence" based on broad funds in a mature market (S&P 500) in the USA. I wouldnt argue with it, possibly because I havent looked at the evidence because I am not personally interested in the sector.

Those who disagree with you are putting forward even stronger evidence that niche funds in the UK can consistently outperform the relevent index (where there is one). This is of interest because such niche funds also appear to outperform the broad mature markets into which most people seem to invest.

Linton

darkpool wrote: »

tbh i think if anyone here had the ability to spot the 0.1% of (lucky?) managers who delivered alpha over decades they would be better researching shares and investing directly.

i'd imagine the ftse100 will be lucky to gain 5% a year in the next decade. that means a fund manager would have to make a gross 8% just to match the index. it's possible, but unlikely.

But why would anyone want to invest solely in the FTSE100? If you are right in your projection of 5% per year, surely one will do better elsewhere.

Or are you claiming that the FTSE100 is in a sense representative of Emerging Markets, Far East, Small Caps, Technology etc?

darkpool

Linton wrote: »

You still havent got it!! You are putting forward "evidence" based on broad funds in a mature market (S&P 500) in the USA. I wouldnt argue with it, possibly because I havent looked at the evidence because I am not personally interested in the sector.

Those who disagree with you are putting forward even stronger evidence that niche funds in the UK can consistently outperform the relevent index (where there is one). This is of interest because such niche funds also appear to outperform the broad mature markets into which most people seem to invest.

It's good that most people here are starting to agree that Unit Trusts in the mature markets add no value.

I seem to have missed the evidence that shows niche funds consistently outperform. I've seen some evidence that a few funds have done well, but I've certainly not seen any overwhelming evidence that the fees paid for a niche Unit Trust are justified.

It seems that a few people have a theory that niche funds consistently outperform. However they certainly haven't presented any solid evidence.

Of course, if you can back your theory up I would be interested in seeing the statistics.