FTSE Tracker vs. Invesco

StevieJ

I am missing something here, according to this the F+C FTSE all share tracker is 50th out of 130 over 10 years, bearing in mind that the current trackers probably have much lower fees than the F+C tracker

http://www.citywire.co.uk/Funds/Home.aspx
You will need to change parameters to IMI All share tracker 10yrs

Just out of interest how are the performances of managed funds that have underperformed and been discontinued included in any comparisons? The above figures appear to include funds that exist now.

Flynn_2

I take what you say on board Dunston but aren't there some things investors should bear in mind?

1) Highly paid city slicker fund managers on massive bonuses will hate tracker funds because they don't employ highly paid fund managers or pay for their champagne lifestyles. They put them out of work.

2) Commission based IFAs won't like trackers that pay them little or no commission.

The FTSE, Allshare etc. are averages. If there a winners there must be losers. The mean for managed funds therefore be around the appropriate index whether it's the FTSE, Allshare or some other. But then there will be management fees that drags the mean below the stockmarket index.

Where funds are managed there's a chance for them to do better than their index but also, because of charges, a bigger likelyhood of doing worse. The Growth fund of Fidelity who you suggested is an example of a fund doing a lot worse than the index and a lot worse than trackers.

What tends to happen of course is that companies like Fidelity have many, many funds. They talk up the successful ones while the duffers are forgotten. To get out of one of their duffers into a decent one will likely cost you more fees so in that respect the industry wins even when they lose. The winner you move into today could then become tommorrow's duffer.

As we all know raw performance isn't everything and volatility is important in any investment. If a fund is down in the year you want to sell it's no compensation that it did very well in the past. Trackers are likely to be less volatile than managed funds if that's what you want and they benefit from having to carry lower costs. You can reduce the volatility of managed funds by using more funds but that won't bring down the costs.

So I'd suggest that whether a tracker is best for an individual depends on the alternatives they are ready to consider. They should also bear in mind at all times when making a judgement that certain professions will have a vested interest in talking trackers down.

dunstonh

Different sites and sources take their data at different dates so you will get slight variences.

The citywire free data is not as detailed and doesnt include as many funds. For example, the fund in question has a series 1,2,3 & 4 all in inc and acc versions. So, that fund was actually listed 6 times (s3 and s4 didnt have acc units).

The lipper data I was reading includes all versions. Hence the higher number.

Flynn_2

StevieJ wrote:

I am missing something here...

If you are then so am I Steve.

It also shows the L&G UK Index tracker at position 45 out of 130. So 85 managed funds have done worse over the last 10 years but charged more.

If as Dunston says 98% of funds are managed and only 2% are trackers how are so many so close to the top despite the statistical odds being against that? It's fairly damning evidence of managed funds.

EdInvestor

dunstonh wrote:

Investors may prefer to take into account that:
1 - a bog standard passive managed UK all companies found would have outperformed the UK FTSE100 and UK FTSE all share funds each and every year for the last 18 years.

Is that before or after charges and dividends?The basic point about using trackers is that you get much the same performance as a passive managed fund, but their low charges mean your return will be higher.

EdInvestor

Single fund investing, whether tracker or tied, is the real downer on performance.

Obviously it depends on the fund. People who chose Fidelity Special Siutuations or Invesco Perpetual Income all those years ago will be way ahead of the pack.

That's why IMHO it's worth putting some effort into tracking down likely outperforming funds, if that's the way you want to invest.

Flynn_2

EdInvestor wrote:

Is that before or after charges and dividends?The basic point about using trackers is that you get much the same performance as a passive managed fund, but their low charges mean your return will be higher.

The cumulative affect of charges is illustrated by the Directline tracker being well down the pack. I gather they charge 1% rather than the 0.5% of some other trackers. Still ahead of Fidelity Growth etc though.

It also shows the volatility. Of those in the top 10 over the last 10 years, 40% of them would have done worse for you than the L&G tracker if you bought them just 3 years ago.

dunstonh

Is that before or after charges and dividends?The basic point about using trackers is that you get much the same performance as a passive managed fund, but their low charges mean your return will be higher.

income reinvested and after charges. If you dont include the charges, then there is little point doing a comparison. Same with income reinvestment.

It also shows the L&G UK Index tracker at position 45 out of 130. So 85 managed funds have done worse over the last 10 years but charged more.

Are you looking at compound growth over x number of years or are you looking year by year performance?

It's fairly damning evidence of managed funds.

If you are looking at 3 year performance, you would expect the trackers to be doing very well. The last 3 years have seen sustained growth and trackers do well in that period. Make it 6 or 7 years to include the crash and watch it go the other way.

7 years ACR :
L&G FTSE 100 tracker 298/309
L&G FTSE AS tracker 156/309

If you invested 7 years ago in the FTSE100 tracker you would still be down with an ACR of -0.51%. The worst fund was -1.62%. The best was +17.38% up and the average was +3.35%

You need to include a negative period in the timescale to show the negatives of trackers otherwise you just get one side of the story.

Flynn_2

Dunston, Citywire shows that the L&G UK Index tracker has outperformed the UK All companies sector in every time period that site gives, i.e. over 1,3,5, and 10 years.

How many of the managed funds that you say make up 98% of the sector have managed that?

You keep talking about the FTSE tracker but you seem to be comparing it to funds that aren't confined to solely FTSE stocks. Is there any reason for doing that? The Citywire chart is for "UK All companies" so some funds may include even smaller companies presumably. Wouldn't it be better to compare like with like as far as possible? Why compare strictly FTSE funds with non-FTSE funds when we all know that the FTSE has well underperformed the Allshare over that period?

Your point that the time span is critical is very valid which surely gives even greater value to funds such the L&G UK index tracker which is by its nature very stable.

Not sure why you pick out 7 years which Citywire don't give, why not 10 years which also includes the crash? The biggest weakness of a tracker is in a fast falling market but you say the L&G AllShare tracker only slipped a whisker below the sector average even including the crash. Very reassuring wouldn't you say?

Also there are only 130 funds 10 years + old instead of the 323 now. I assume there were more then, what happened to them?

EdInvestor

Also there are only 130 funds 10 years + old instead of the 323 now. I assume there were more then, what happened to them?

Old non-performing funds get quietly closed to new business so they drop out of the performance tables.But they are usually left to maunder along in the background as there may be people invested in them with old high charged contracts which benefit the fund manager/insurer, so you wouldn't want to do anything that might alert sleepy investors that they should move on.

Sometimes they get merged with other similar funds.