Fund of Funds II

TH1878

Totton wrote: »

I wouldn't agree with that claim, you only need to read a few FoF fact sheets to see that they often follow managers, easy example would be the use of Findlay Park for US coverage. An excerpt from the Jupiter FoF brochure states -

"Investment is an art
The team believes that the most important factor in how a fund is likely to perform is the individual who runs it and so they interview managers face-to-face to gain first-hand information. They are interested in how long the manager has been managing the fund, how performance has been achieved, and the risks that were incurred in achieving it. They also want to know about the style of management and, crucially, how likely it is that the fund will continue to succeed in the future."

Regards,
Mickey

Sorry Mickey, that was typo. You're right, it should have said Fund Manager rather than FoF. The original question was why would you trust a fund manager to pick stocks but not unit trusts.

I have a copy of John Chatfield-Roberts's book (Fundamentals) where he discusses the above. The advantage they have is that they are more able to do the qualitative analysis because they have access to the fund manager.

The quantitative stuff can be done by anyone with the knowledge, inclination and software but I just don't think that being able to meet the fund manager is worth the extra fees charged by Fund of Funds.

Totton

Hi TH1878,
Good book by Chatfeild-Roberts although I'd like to know a little more about one or two of the stories he 'half-tells' :-) The Jupiter Merlin range are a case in point though, just why are they so expensive when as the manager writes they can take advantage of buying some Jupiter funds and saving costs, that does seem at odds with their high TER.

Shame really as I think FoF could have a valuable role to play in low value portfolios.

As for meeting the manager, I agree with you, it is not unusual to read that the fund manager doesn't meet or places low value on meeting companies. In fact one of our very worst investments followed the stockbroker telling us that he had met the company and everything was good, I think the shares went from £7 a pop to less than a penny within a year or so. (Don't use that stockbroker anymore!)

Best Wishes,
Mickey

JamesU

TH1878 wrote: »

And can also be extremely opaque and complex. The FSA has raised the use of ETFs as a future risk over the next few years - you need to be absolutely sure you know what you're buying.

For example, the combined value of all the gold ETFs (ETCs) in the world exceeds the actual amount of physical gold.

Agreed. Care also with synthetics, has been discussed previously but needs to be pointed out regularly.

JamesU

darkpool

TH1878 wrote: »

And that's why we've beaten the weighted indices benchmark since running model portfolios in October 2008 after factoring in charges.

You use the above metrics to aid you in your decision and weed out the average fund

welcome aboard the thread, always good to have another financial professional tell everyone what a good job they do.

so you've come up with a system that can beat the markets? awfully good of you to tell us about it, perhaps you could tell us a little bit more?

perhaps you should pitch it on "Dragons Den"? I'm sure they'd be keen on any investment where you charge 3% a year come what may and they get what's left.

dunstonh

perhaps you should pitch it on "Dragons Den"? I'm sure they'd be keen on any investment where you charge 3% a year come what may and they get what's left.

See what I mean. Here you are presenting 3% p.a. as what the adviser is charging.

darkpool

dunstonh wrote: »

See what I mean. Here you are presenting 3% p.a. as what the adviser is charging.

why don't you look at it from the consumers viewpoint? they only know they are getting an investment that has 3% annual fees, they really don't care where the 3% is going.

so what is the long term return on the stockmarket? is it not about 5% after inflation? so the typical charges paid to the financial industry is over half the likely investment return?

dunstonh

why don't you look at it from the consumers viewpoint? they only know they are getting an investment that has 3% annual fees, they really don't care where the 3% is going.

Your opinion of what a consumer really wants is one thing. Presenting the charge as if the IFA is getting it is another. Especially on threads which are slagging off adviser costs. Presenting the charge as being between 300% and 600% more than it really is for IFAs is not helping anyone.

so what is the long term return on the stockmarket? is it not about 5% after inflation? so the typical charges paid to the financial industry is over half the likely investment return?

Typical charges do not eat half the return. I would be mightily disappointed with just 5% before charges on equities. Especially when you consider dividends. I would be disappointed with 5% after charges over the long term as well. However, for short/medium term periods then its possible (just have to look at recent years for that).

TH1878

darkpool wrote: »

why don't you look at it from the consumers viewpoint? they only know they are getting an investment that has 3% annual fees, they really don't care where the 3% is going.

Who charges 3%? I've never placed a client into an investment with a TER of 3% even including my fees - that's why I don't like Fund of Funds (which is what this thread is about).

You seem to think that financial planning is just about investment management anyway - it's not. This just forms a small but important part.

darkpool

dunstonh wrote: »

Typical charges do not eat half the return. I would be mightily disappointed with just 5% before charges on equities. Especially when you consider dividends. I would be disappointed with 5% after charges over the long term as well. However, for short/medium term periods then its possible (just have to look at recent years for that).

most evidence i've seen shows historically stockmarkets grow at 5% a year in real terms. perhaps you could provide some links that show markets provide substanially higher returns?

Totton

Hi darkpool,
Please don't take this the wrong way as I mean no offence. I find it very tiresome reading your constant attacks against the IFA's etc, I'm all for you having your view but couldn't you just put something in your 'signature' rather than repeating the same message on so many otherwise useful posts?

Best Wishes,
Mickey