How you pay for the City

atush

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

I expect you are right, but as a former Cancer researcher, I found it a highly entertaining concept lol

Glen_Clark

Lokolo wrote: »

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

I never did say you can see future returns did I
Are you just making that up like a straw man to knock down?

To a certain extent you CAN see the majority, if not all of of future costs if the charging structure is agreed in advance. And that will obviously affect future returns.

What is just ridiculous is your assertion that because you can see past performance (which you should know is no guide to the future) you don't need to know future costs (which will affect future returns)!!

N1AK

cepheus wrote:

There is enormous evidence that active management funds perform worse than passive funds over the long run. Better to use monkeys with pins because they charge peanuts. 'Active' managers are forced to closet index track, churning stocks, selling winners too early and allow losers to run.City managers should get paid for performance not activity.

If the shipping industry had developed along similar lines to the City we would mainly see cargo being loaded between ships with little actually reaching its intended destination, and only the dockers benefiting. :eek:

It's a poor analogy. A better one might be if one shipping firm followed the standard route and charged a low fee, another used special navigation specialists to plot different routes and charged a higher fee. The thing is people would quickly see that paying more didn't mean their shipping would get their faster and stop using them. Thus why we don't have massive inefficiency in the shipping industry.

I personally think passive investing is the better idea. I find it hard to get too passionate about the issue of active funds though because all the information needed to make an informed decision is available. It's not like active investors are guaranteeing better returns or hiding the fees.

For some reason a lot of people put a lot of money in high fee active funds. Some of them are very intelligent, well informed people and do so knowingly.

Lokolo

Glen_Clark wrote: »

What is just ridiculous is your assertion that because you can see past performance (which you should know is no guide to the future) you don't need to know future costs (which will affect future returns)!!

No that is NOT my assertion. It is very clear in my post that to be able to compare your fund performance against other funds and returns from elsewhere (savings etc.) that you do not need to see costs.

This is what was explicitly said in the radio programme. As I have, already twice now, quoted.

An investor, over a year, can look at the figures and say how well the fund has done precisely and this is what I may have earned in the building society, bank or another fund.

IronWolf

I dont get why people get so worked up about this. If you don't like investing in funds then dont. Imagine the market if everyone invested in trackers....it wouldn't function, people wouldn't buy and sell based on new events or value they would just be 'rebalancing'.

The market needs funds and active managers to work properly. There are good managers around that consistently beat the market, even more that manage their own money.

cepheus

IronWolf wrote: »

I dont get why people get so worked up about this. If you don't like investing in funds then dont. Imagine the market if everyone invested in trackers....it wouldn't function, people wouldn't buy and sell based on new events or value they would just be 'rebalancing'.

The market needs funds and active managers to work properly. There are good managers around that consistently beat the market, even more that manage their own money.

Oh yes, and who are these? Out of the thousands of funds a few must do well by chance even after 20 years or so. Even if they were skilful do these still provide value after the higher fees? Out-performance is a statistical fallacy of data-mining.

I believe individual investors can beat the market because they can react to the market far more quickly and obtain profits without moving the price too much. This is not practical for large fund managers.

The only way they could potentially outperform is by owning a majority stake and changing the business. A few perhaps have obtained such a high reputation that merely buying a company guarantees that the stock is priced at a premium. However, it doesn't mean they were any more skilled than anyone else.

IronWolf

cepheus wrote: »

Oh yes, and who are these? Out of the thousands of funds a few must do well by chance even after 20 years or so. Even if they were skilful do these still provide value after the higher fees? Out-performance is a statistical fallacy of data-mining.

I believe individual investors can beat the market because they can react to the market far more quickly and obtain profits without moving the price too much. This is not practical for large fund managers. The only way they could potentially outperform is by virtually owning the business and changing it.

There are countless, the biggest names are all over CNBC every day. George Soros, Carl Icahn, Bill Ackman, Seth Klarman, Warren Buffett, Daniel Loeb, Joel Greenblatt. There are many more less known names doing very well in smaller hedge funds.

You can believe they are statistical anomalies if you want

cepheus

Well that why I said some have gained by owning the business and influencing the market, not as fund managers. Even then....

Fund manager performance the proof

IronWolf

All of them beat the market without owning businesses or influencing the market.

You don't become a billionaire hedge fund manager on CNBC without the track record first. THEN you can influence markets and throw your weight around.

doughnutmachine

John1993 wrote: »

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?

so what is the point of a managed fund then? why do fund managers charge large sums of money if it's not to beat the markets?