How you pay for the City

Glen_Clark

Lokolo wrote: »

How on earth will that be helpful? We already see the end return of the product, so we can already compare with other funds, with returns from banks and make an informed decision of how to proceed in the future. How is telling us that we got a 9% return over the past year and the costs before that return were y% helpful?

If we did see the end return of the product as you say, you might have a point. But we don't. We may see past returns but thats irrelevant. What we want to know is future returns. And an indication of that is how much is being siphoned off in charges.

Lokolo

Glen_Clark wrote: »

If we did see the end return of the product as you say, you might have a point. But we don't. We may see past returns but thats irrelevant. What we want to know is future returns. And an indication of that is how much is being siphoned off in charges.

That's just ridiculous and not even possible. You cannot see future returns, OR future costs.

If you are saying that past returns are irrelevant, then surely past costs are as well?

A fund, be it managed or passive, will have past costs, but these don't indicate possible future costs. For example, a new fund will have a lot more costs in it's first year. What if the index happens to change a lot in one year? It will massive increase the costs of a passive fund, but that doesn't mean that it's always going to have these higher costs does it?

You can't say "Past performance is not an indicator of future performance" without saying the same for costs.

googler

Without reading beyond the headline, the pedant in me wants to ask -

Which City?

grey_gym_sock

Ark_Welder wrote: »

Wrong. Sending the monkey into Boots to pick up the first thing will result in consistently inferior results.

you've misinterpreted what i was saying ... which was that, if sending the monkey into boots worked as well for medical treatment as tracker funds do for investment, then it would do about as well as the supposed experts, and more consistently than them ... but that in fact the monkey wouldn't do as well as the monkey with a pin and the FT ... so it is wrong to suggest that one shouldn't rely on the monkey with a pin just because one wouldn't rely on the monkey with savlon.

dunstonh wrote: »

What about in areas where there are no trackers or there is not a tracker that covers the investment style you are looking for or you have a preference for lower volatility than that of the tracker or a preference for higher volatility?

that is a good point.

cepheus

Lokolo wrote: »

That's just ridiculous and not even possible. You cannot see future returns, OR future costs.

If you are saying that past returns are irrelevant, then surely past costs are as well?

A fund, be it managed or passive, will have past costs, but these don't indicate possible future costs. For example, a new fund will have a lot more costs in it's first year. What if the index happens to change a lot in one year? It will massive increase the costs of a passive fund, but that doesn't mean that it's always going to have these higher costs does it?

You can't say "Past performance is not an indicator of future performance" without saying the same for costs.

Costs are far more stable than performance, and once the charging structure is changed we can be sure it will remain that way for a while. Moreover, surely we can be reasonably sure tracker costs will remain small in relation to managed funds.

Lokolo

cepheus wrote: »

Costs are far more stable than performance, and once the charging structure is changed we can be sure it will remain that way for a while. Moreover, surely we can be reasonably sure tracker costs will remain small in relation to managed funds.

I am sorry but I don't agree with this. If you can show me evidence that fund charges have a low deviation then I will quite happily accept it. (and I would be very interested to see this data actually!)

And although I agree that passive will mostly have a lower running cost than active, that is not the point I am clearly making.

John1993_2

grey_gym_sock wrote: »

if the results for monkey into boots vs top oncologist were the same as for monkey with a pin vs professional fund manager, then the monkeys in boots would have very consistent, mid-table clinical outcomes, and the top oncologists would have wildly varying outcomes - some far better than the monkeys, some far worse - but there'd be no consistency from year to year for which oncologists did well, so there'd be little point in picking last year's top performers.

i conclude that the analogy doesn't work

Again, you don't seem to understand the point of a managed fund. You seem to think that its intention is necessarily to beat "the markets". Why would you think this?

John1993_2

doughnutmachine wrote: »

ehhhhmmm If the monkey picked medicines that cured the cancer and the oncologist picked medicines that killed the patient I would rather go with the monkey

And, as with the poster above, yoru confusion seems to come from not understanding the point of a manged fund. You are comoaring a metric that they are not seeking to maximise. This makes no sense.

Why this biizarre concentration on average returns? Why do you ignore the competely key point, about the distribution around the mean, the correlation with other factors, the risk-adjusted outcome?

blinko

What I thought was taking the mick was that when shares are loaned out to be shorted by hedge funds etc the fee for the loan shares does not go back to the fund but direct into the fund managers PnL

Ark_Welder

grey_gym_sock wrote: »

you've misinterpreted what i was saying

One can only interpret from what is presented.