FTSE Tracker vs. Invesco

Flynn_2

EdInvestor wrote:

Old non-performing funds get quietly closed to new business so they drop out of the performance tables.

So can we assume that maybe two thirds of the current 320 managed funds will be failed funds over the next 10 years and will be quietly shuffled off to the knackers yard and out of the statistics to avoid embarrassment? A bit scary. No wonder they can pay for those Jeroboams.

dunstonh

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?

I am comparing it with any fund that is in the UK All companies sector and no others. It wouldnt be right to include any other funds outside of the sector as the risk profile/aims etc would not match.

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?

These funds are in the UK all companies sector and its only right to compare them on that basis. Leaving funds out just because it makes the tracker look better isnt really fair.

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.

Its not stable. It follows the index up or down. There is no downside protection which a managed fund would have and that would typically make the managed fund lower risk and give it a smoother return potentially.

Not sure why you pick out 7 years which Citywire don't give, why not 10 years which also includes the crash?

I choose 7 years as that takes us to before the crash and gives us an equal period of decline and growth. The ideal balance to compare different funds in two contrasting periods.

The biggest weakness of a tracker is in a fast falling market but you say the L&G only slipped a whisker below the sector average even including the crash. Very reassuring wouldn't you say

Not reassuring for the person who has chosen a FTSE tracker thinking its low risk (which is far too many). Most people are not concerned when their portfolio goes up. They are happy whether they get 13% or 17%. Its when it goes down that they get concerned and suddenty a 4% difference becomes important.

The L&G FTSE all share tracker dropped by over 40% in value between end of 99 and 2002. How many people who were in that really had the risk tolerance to accept that sort of loss?

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.

Lipper has it at:

1 year = 351/667
3 year = 270/552
5 year = 201/417
10 yr = 87/199

Seeing as there have been comments about commissions and charges and IFAs favouring one fund because it pays commissions, lets pick the most sold fund by IFAs for decades to compare it :- Fid Spec Sits.

Lipper has it at:

1 year = 355/667
3 year = 63/552
5 year = 14/417
10 yr = 2/199

£10,000 invested 10 years ago (inc reinvested, charges taken into account) would have:

L&G index tracker : £20,729
UK all companies sector average: £21,755
Fid Spec Sits: £45,040

Flynn_2

I just realised those figures are bid to bid, not offer to bid so the managed funds lose up to another 7% over the 0% spread of the best trackers?

nrsql

Haven't read all through this thread but it seems to be missing that funds come and go.
A poorly performing managed fund will at some point be merged with another fund and so disappear from the lists. There are some left but that's because they either don't want investment or don'r rely on performance to attract it.
Trackers will perform as expected - just below the index they are tracking so this shouldn't apply to them.
Therefore you should see that over the long term most managed funds will perform above the index - just because a lot that don't no longer exist.

If you have decided on a sector then a tracker will give you gains just below that index. If you choose well a managed fund will do better but if you choose badly or something outside your control happens (change manager, extra charges, ...) then you could lose out massively.

As investing is about risk and return - and as risk is usually more important then there is a strong case for trackers.
Losing 10% is more difficult to recover than gaining 10% is to lose.

dunstonh

I just realised those figures are bid to bid, not offer to bid so the managed funds lose up to another 7% over the 0% spread of the best trackers?

7%? are you making up figures as you go along?

Flynn_2

dunstonh wrote:

I am comparing it with any fund that is in the UK All companies sector and no others. It wouldnt be right to include any other funds outside of the sector as the risk profile/aims etc would not match.

Do you think that their FTSE tracker best matches the rest of the sector? Better than their Allshare tracker? Hmm, I'd be a tad worrieds about an advisor who told me that. Think I'd make my excuses and leave.

As I'm sure you know the FTSE has massively underperformed the Allshare. Unless you think the managed funds would show up badly I'd suggest you compare their FTSE tracker with other FTSE funds and the Allshare tracker with the Allshare funds in the sector. Wouldn't make much sense otherwise would it?

Not sure if you noticed but I asked earlier:
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?

Also do you know how many managed funds were there 10 years ago and have been put out of their misery?

Flynn_2

dunstonh wrote:

7%? are you making up figures as you go along?

As you're in the trade I'll let you tell me the exact figure for the maximum offer/bid spread for a UT. Do you know what it is? More than the 0% of some trackers I assume?

Flynn_2

PS The first one I looked at was JUPITER UK SMALLER COS. Shows Bid 132.32 and offer 141.14 - which is +6.7% by my reckoning. So what would you say would be the highest?

Or should I have said up to 6.7%?

Ian_W

Don't really have time to go through all the arguments but I'm surprised that Flynn refers to trackers which have no downside protection as "more stable", though if I've taken that out of context I apologise.
If the index goes down 30% [as the L&G one did in the crash] then a £1000 becomes £700 and has to recover nearly 50% to be back in the black - same applies to a managed fund, of course, but the manager doesn't have a mandate to track the index down and MAY be able to avoid doing so - a tracker can't.
I'm also surprised that Flyn says the all share index massively out-performed the FTSE100 index when AFIAK the FTSE 250 far and away outperformed them both! See
https://www.trustnet.com/general/charting.asp - if the link works.

The OP was asking about Invesco and this link may be of interest:
https://www.h-l.co.uk/fund_research/fund_performance.hl?x=59&y=12&sedol=0103653&timescale=4&timespan=60&chart_scale=R&compare_index=none&compare_provider=329&previous_compare_fund=3107481&compare_fund=3107481&tr=

It compares Invesco's cautious managed fund [a decent if not outstanding fund of that type] with the L&G tracker I believe you're referring to - I know which I'd rather have been invested in for the last 5 years!!

dunstonh

Do you think that their FTSE tracker best matches the rest of the sector? Better than their Allshare tracker? Hmm, I'd be a tad worrieds about an advisor who told me that. Think I'd make my excuses and leave.

I dont follow you on that comment I'm afraid.

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?

Thats a lot of research but looking at the first couple of pages, I see many funds which appear consistently in the top half for most if not all the years in that period. Lipper shows the UK FTSE all share tracker as being in the bottom half of the UK all companies sector each and every year since it was launched.

AFAIA, citywire only shows compound and not single year performance.

As you're in the trade I'll let you tell me the exact figure for the maximum offer/bid spread for a UT. Do you know what it is? More than the 0% of some trackers I assume?

The figures are typically zero to 5%. The average commission taken by advisers is 1.8%. So, on Inv Perp income, the initial charge would be 1.8% on that basis.