Fund managers

gadgetmind

Linton wrote: »

I am not bothered about short term correlation

Is anyone?

So the sectors that have worked for me are EM, Small Cap, Tech, Raw Materials (not an IMA sector), Far East.

EM and FE have been shown to benefit a portfolio (and there are good EM, Pacific and Japan trackers), as has some percentage in smaller companies. Commodities and tech are less studied, but the former is usually viewed as not being up-to-snuff alpha wise.

The other sector where index based investing seems to fail is UK Income.

Out of income, growth and value, ISTR that it's only the latter than has been shown to have a long term benefit in a portfolio, and even there it's marginal.

As I run my own income portfolio (mainly because of the tax advantages, as high yield still has to prove itself) I'm happy for my (fledgling!) tracker portfolio to use a mix of UK (small cap biased), US, Europe, Pacific, Japan and EM, with a small helping of bonds.

I intend to do some dynamic balancing between equities and bonds and will let yields, p/e and p/b ratios tell me which areas are over-priced (reduce) or value (overweight).

IronWolf

gadgetmind wrote: »

There are usually income and accumulation versions, and also different types of units with different fee structures and "kick back" models. Big platforms are even now requesting different issues to give them different ways to charge.



Yes, and this can be *very* difficult to calculate for accumulation funds. You *should* be taking into account the reinvested yield for your income tax, and then need to allow for this when calculating the gain at the end.

It seems odd, but income units are easier to handle when held unwrapped.

I see, its odd that the historic gains on the I fund are greater than the A fund though, I would have thought it was the other way round?

Linton

darkpool wrote: »

no what i'm saying is that it is more sensible to invest in a tracker rather than a UT in the same sector*. of course if there is no tracker in the specific sector you want to invest in it might make sense to use an UT.

I thought you were going to give some evidence that showed niche UTs outperformed trackers in the same niche sector?* It's certainly an interesting theory, however without evidence to back it up it will remain a theory - and a theory that I would suggest is seriously flawed.

*just to make clear i'm talking about trackers and UTs that trade in the same geographical/ business area etc.

By any chance do you work in the fund industry as well?

Typical of your arguing style - no real evidence other than quotes from the internet and a belief that the only reason anyone could possible disagree with you must be because they have some sort of corrupt vested interest.

For the record I have never worked in the fund industry. I am a retired IT project manager - my savings/investments enabled me to stop working in my mid fifties.

gadgetmind

darkpool wrote: »

I thought you were going to give some evidence that showed niche UTs outperformed trackers in the same niche sector?*

Trackers and niche don't really go together. With over 3000 funds in the UK, and a handful of trackers, there are always going to be funds that specialise in (say) Emerging Market Dental Equipment Servicing Companies and almost certainly no corresponding tracker.

OK, unforgiveable exageration, but I might spend lunchtime looking for the most zany UK fund I can find.

Linton

IronWolf wrote: »

I see, its odd that the historic gains on the I fund are greater than the A fund though, I would have thought it was the other way round?

I suspect "I" may be for Institutional, if so it could perform better as bulk buying could be rewarded with lower charges. The main fund is characterised as Acc.

darkpool

Linton wrote: »

Typical of your arguing style - no real evidence other than quotes from the internet and a belief that the only reason anyone could possible disagree with you must be because they have some sort of corrupt vested interest.

For the record I have never worked in the fund industry. I am a retired IT project manager - my savings/investments enabled me to stop working in my mid fifties.

OK, i assume you have no evidence that shows UTs outperform trackers.

I would suggest the evidence that shows trackers outperform the comparable UT has been pretty overwhelming.

The evidence that "proves" UTs are better are just a variation of the "perp high income has done well" type argument. Nothing wrong with that type of argument - if you're under 12.

darkpool

gadgetmind wrote: »

Trackers and niche don't really go together. With over 3000 funds in the UK, and a handful of trackers, there are always going to be funds that specialise in (say) Emerging Market Dental Equipment Servicing Companies and almost certainly no corresponding tracker.

OK, unforgiveable exageration, but I might spend lunchtime looking for the most zany UK fund I can find.

i agree with you, but it would still be good to see if there was any academic evidence that showed if small company UTs outperformed small company trackers etc.

I could be persuaded that a good manager in that sector might add a % or so to alpha return, but not enough to justify the 3% annual fees.

Linton

gadgetmind wrote: »

Out of income, growth and value, ISTR that it's only the latter than has been shown to have a long term benefit in a portfolio, and even there it's marginal.

Income is important if that's what you need to live on. That is where the High Yield Portfolio approach came from as an alternative to an annuity. Its arguable success as a long term return strategy was secondary.

I am not convinced by these textbook claims of income vs growth vs value. My suspicion is that they are derived from experience in the large mature markets of the UK and the US where people are trying to extract small advantages from quirks in what is basically an Efficient Market.

My preference for the past 9 years has been to try to look at the broader global economic long term picture and to go with the trends.

Linton

darkpool wrote: »

i agree with you, but it would still be good to see if there was any academic evidence that showed if small company UTs outperformed small company trackers etc.

I could be persuaded that a good manager in that sector might add a % or so to alpha return, but not enough to justify the 3% annual fees.

Here is the performance data for a small cap tracker which does a good job of following the FTSE Small Cap Index. Sorry its an offshore fund, but for some reason I cant find any on-shore UK Small Cap trackers. Perhaps these figures suggest why.

5 year performance: -7.13%

Here is the data for the UK smaller companies fund sector average.

5 year performance: +7.9%

NOTE - fund return data includes all charges, they are built into the fund price. So if a fund matches the index its investments are already outperforming by your 3%.

darkpool

Linton wrote: »

Here is the performance data for a small cap tracker which does a good job of following the FTSE Small Cap Index. Sorry its an offshore fund, but for some reason I cant find any on-shore UK Small Cap trackers. Perhaps these figures suggest why.

5 year performance: -7.13%

Here is the data for the UK smaller companies fund sector average.

5 year performance: +7.9%

NOTE - fund return data includes all charges, they are built into the fund price. So if a fund matches the index its investments are already outperforming by your 3%.

correct me if i'm wrong, but the tracker tracks the FTSE small cap index, while the aim of the UTs is to invest 80% of their portfolio in the smallest 10% of the index. Not really the same thing......

do you have any academic evidence that shows niche UTs outperform the relevant tracker? If your theory about niche UTs is right there will be some evidence. all these links to trustnet are pretty poor evidence in my opinion.