Fund managers

darkpool

Lokolo wrote: »

As I said in my earlier post. Darkpool very much generalises. It cannot be a mixture of the 2, its one or the other.

as a matter of interest do you work in the financial industry?

qpop

darkpool wrote: »

Wrong, Wrong, Wrong

the TER does not include dealing fees incurred by the fund.

My apologies, slow moment.

andybenw

Seems there are arguments for both sides. And the sides at the moment would be high cost managed fund vs low cost tracker. 2 more queries.


1. If I had a broad portfolio of shares held by myself rather than a tracker how would I fare with dealing costs as opposed to the charges of the tracker.

2. Is a tracker inefficient. eg as a share drops out of the FTSE 100 for a FTSE 100 tracker surely it is being sold at a bad time and low price. Or would it simply be seen as getting out before even worse happens to the share.

gadgetmind

qpop wrote: »

I don't understand how you are so derisive about OEICs yet seem to openly support ITs - which run on a very similar premise.

ITs have a number of advantages. I much prefer their closed-ended nature as it allows them to avoid issues with "hot money", and I'm prepared to live with the discount/premium issues this raises. They also tend to charge significantly lower fees as they don't (generally) advertise and don't have to give fund platforms or advisors kick-backs. The income oriented ITs are also very useful as they maintain a reserve to cover years where yields are low. They can also gear, but I never see this as being an immensely good thing.

However, there are ITs that under-perform, and as with funds, the losers use a variety of techniques to disappear such that anyone looking at the performance of the survivors will be impressed.

I'm currently only holding the conviction/PE ITs such as PNL, RICA and RCP, but in retirement I will give moving to a basket of income and growth ITs some serious consideration.

darkpool

andybenw wrote: »

Seems there are arguments for both sides. And the sides at the moment would be high cost managed fund vs low cost tracker. 2 more queries.


1. If I had a broad portfolio of shares held by myself rather than a tracker how would I fare with dealing costs as opposed to the charges of the tracker.

2. Is a tracker inefficient. eg as a share drops out of the FTSE 100 for a FTSE 100 tracker surely it is being sold at a bad time and low price. Or would it simply be seen as getting out before even worse happens to the share.

i use lloydstsb nominee sharedealing. i believe i pay 15 pound a trade plus 8 pound a quarter. remember when you buy shares you have 0.5% stamp duty as well. i believe a tracker will charge 0.5% a year.

trackers do have that drawback, to be fair only 2 or so shares are kicked out the ftse100 each quarter.

if you had over 40k i would suggest 20 holdings of 2k each.

gadgetmind

andybenw wrote: »

1. If I had a broad portfolio of shares held by myself rather than a tracker how would I fare with dealing costs as opposed to the charges of the tracker.

That depends on how often you trade. I tend towards a long-term buy and hold strategy, for a number of reasons. 1) To reduce dealing costs, 2) I don't have the time or inclination to get into short-term trading, 3) Most of our holdings are outside of ISAa/pensions due to the subscription/contribution limits so we need to be wary of CGT, 4) my wife doesn't pay higher rate tax, so a dividend income stream is very tax efficient.

2. Is a tracker inefficient. eg as a share drops out of the FTSE 100 for a FTSE 100 tracker surely it is being sold at a bad time and low price. Or would it simply be seen as getting out before even worse happens to the share.

That is an oft-quoted drawback of trackers, yet they have still out-performed the vast majority of funds over the decades, and those funds that have shown periods of out-performance haven't shown the ability to maintain this.

With funds, you might get lucky and but the right one at the right time, or you might not. If instead you buy a wide range of funds, you end up with a portfolio that will act as a "closet trackers" but with higher fees.

However, I don't think the active versus passive debate will *ever* end, so I guess we need to do our own thing while trying to disagree without being disagreeable.

gadgetmind

darkpool wrote: »

i use lloydstsb nominee sharedealing. i believe i pay 15 pound a trade plus 8 pound a quarter.

Even Hargreaves Lansdown are cheaper than that!

i believe a tracker will charge 0.5% a year.

HSBC trackers are 0.27% to 0.37% (cheaper for UK, more expensive for Pacific), but if you add in an Emerging Markets tracker and some bonds, you'll end up being just over 0.35% depending on your weightings.

Vanguard are cheaper and better for long-term holdings.

qpop

http://www.trustnet.com/Managers/ManagerPerf.aspx?MP_sortedColumn=P120m,LastName,Name&MP_sortedDirection=DESC

That is the total return league table of active managers over a period of 10 years - It's a good starting point.

If you subscribe to the argument that fund managers aren't able to pick winners consistently against the indices, then don't invest in shares (as mentioned earlier) - as you must surely conclude you will do no better either.

Lokolo

darkpool wrote: »

as a matter of interest do you work in the financial industry?

I work for a company in the finance industry, but in the IT department.

gadgetmind

qpop wrote: »

If you subscribe to the argument that fund managers aren't able to pick winners consistently against the indices, then don't invest in shares (as mentioned earlier) - as you must surely conclude you will do no better either.

A diverse selection of income shares will currently yield dividends of over 4%pa, but 3.5% is maybe a better long term figure. Most of your gains will come from re-investing these dividends.

Or you can give the thick end of 2% of your gains to a fund manager every year, and in bad years give them 2% despite low yields and falling capital values. What does mathematics suggest this will do to long-term results?