BBC say it's "likely" the FTSE 100 will break 7000 in 2015 but warn on trackers

masonic

Rollinghome wrote: »

But bear in mind that the management charges, even for the same share classes, have fallen for many trackers in recent years which can make meaningful comparisons difficult or impossible.

While the variation in historic charges is something to bear in mind, I think it would still be fairly easy to pick out a tracker that doesn't include dividends vs. those that do.

I'd think 2-3 years data would be sufficient to get a good view of how closely a fund is tracking the index. If 2 or 3 periods of discrete 12 month performance minus charges matches the index, but there are earlier periods where the fund was underperforming based on current charges, then that would be worth exploring further and not ruling out. I'd want to know the reason for any historic discrepancies though.

For funds that haven't tracked closely in the last 2-3 years, even if they had recently reduced their charges, I would want to wait for that history under the new fee structure. It might be the case that the fund has changed the way it operates to reduce costs, so there could be a trade off between charges going down and tracking error going up.

With so much choice among cheap trackers for the major markets, I don't think it would be a compromise to discard those funds that have slashed their charges only very recently (and those minority trackers that paid a material amount of pre-RDR commission).

Rollinghome

masonic wrote: »

I'd think 2-3 years data would be sufficient to get a good view of how closely a fund is tracking the index.

Absolutely, with trackers (unlike active-managed funds) there's no reason why it shouldn't be, but I commented because you said:

masonic wrote: »

For performance data, I'd ignore the documentation and go straight to a site like Trustnet... This will provide you with performance charts that you can customise to look at time periods well beyond what the fund managers tend to publish.

If you wanted to consider performance over longer periods then you'd need to check all changes in charges over that period and possibly make fairly complex adjustments. Unless those changes are known and taken into account then there's not much point in looking back over longer periods.

masonic

Rollinghome wrote: »

Absolutely, with trackers (unlike active-managed funds) there's no reason why it shouldn't be, but I commented because you said:

masonic wrote: »

For performance data, I'd ignore the documentation and go straight to a site like Trustnet and locate the fund you are interested in. This will provide you with performance charts that you can customise to look at time periods well beyond what the fund managers tend to publish.

Well ok, that was quite sloppily phrased. What I intended to convey was more that you can customise the charts to view like for like performance of a selection of funds over any time period you wanted, using "beyond" in terms of number of time periods rather than the time range itself.

RetiredInThailand

I own several tracker ETFs. Some are accumulating and some pay dividends but all of them own the physical shares they track.

I wouldnt touch synthetic trackers with someone else's bargepole.

IronWolf

The risk eith synthetic trackers isnt about dividends its about counterparty risk. In a crisis a normal tracker is fine because it owns shares, but a synthetic tracker using derivatives is relying on someone else, usualy a big bank, to pay out each year. As we saw in 2008, sometimes even big banks dont have the funds to honour these contracts