Record inflows of $236bn into Vanguard funds in 2015

gadgetmind

bowlhead99 wrote: »

Of course, 'trousered' is quite an emotive statement

I think it could actually be focused a little more and propose "pin-striped trousered".

The more we can get rid of these layers of over-paid middlemen, and get closer to the actual assets (you know, the things that actually generate the returns) then the better off everyone (except the middlemen, world's tiniest violin) will be.

grey_gym_sock

you wouldn't invest in a BTL without taking out insurance. the same should apply to a BTM (= buy to milk).

bowlhead99

grey_gym_sock wrote: »

you wouldn't invest in a BTL without taking out insurance. the same should apply to a BTM (= buy to milk).

The farmers (though claiming to be ripped off on all sides in the dairy businesses) are, perhaps like investment managers in pinstriped trousers, likely to be squeezed a bit further.

In the same way you can run an investment fund with a computer index or stockpicking robot, you can largely automate the milking process. Just have a bunch of expensive robots hook the cows up to machines (like the human fields in the Matrix movie) and the 'overpaid middleman' farmer whose main skill is knowing one end of a cow from t'other will soon be looking for a job while we can get closer to the cheap and efficient milk.

Probably not much fund being a cow lashed up to a machine at the behest of robots with no passion or compassion, but similarly it is probably not much fun being a listed company director being pushed around by shareholders who are just index funds with no passion or compassion.

gadgetmind

bowlhead99 wrote: »

In the same way you can run an investment fund with a computer index or stockpicking robot

You don't need anything as fancy. A tea cozy has almost as much CPU horsepower as is required to run a cap weighted index. An equal weighted index is a little harder with those difficult (OK, trivial) rebalancing calculations twice a year.

similarly it is probably not much fun being a listed company director being pushed around by shareholders who are just index funds with no passion or compassion.

We regularly meet with our major investors (we're FTSE listed) who I'm glad to say aren't all fund managers, which means we don't have to pull our punches regards difficult concepts and sentence length.

Yes, if index investing becomes more than (pulls figure from thin air) 75% of the investment tapestry, then valuations will become rather interesting, but there will always be active mugs in the same way that there are lottery mugs.

racing_blue

Here is the 2015 performance data declared in another thread:

George4064 Acorn Income Fund. Edinburgh IT. European Assets Trust. Biotech Growth Trust. Woodford Patient Capital Trust. CF Woodford Equity Income 21.26%
ColdIron Woodford Equity Income 17.50%
Bazofts Revenge Provident Financial, Segro, Dominos, KCOM,Woodford EquityIncome, Centrica, Tungsten Corporation, Morrison, others 16%
Wooder Fundsmith 15.74%
chesterdog Legg Mason Japan,MFM Slater Growth, Woodford Equity, Fundsmith Equity, Small Companies Div Trust, Capital Partners IT, Scottish MOrtgage IT, Worldwide Healthcare IT, Baillie Gifford Global Discovery, Fundsmith Emerging Markets, India Capital Grwoth, VWRL, others 11.80%
Sacrpacci shares, large portion US listed 8.60%
RedPete undisclosed 5.20%
pip895 managed funds avoiding miners 5%
MattyGroves2 divesified selection of Uk Shares and managed funds 4.57%
Linton large diversified portfolio of managed funds 4.24%
TonyMMM "a number of funds" 4.12%
JimJames funds and ITs 3.50%
Doshwaster fund and shares 3.10%
TheTracker undisclosed 2.50%
Kangoora Various "SL branded funds" 0.015
JohnRo Regional/global index tracking 80%, managed specialist fund 20% 0.04%
ffacoffipawb Investment Trusts -0.90%
AlanP tracker funds -1.09%
broken biscuits undisclosed -1.10%
Ruperts Vanguard 80/20 74%,other trackers -1.55%
enthusiastic saver "stocks and shares" -4.09%
racing blue trackers, shares, commodities -6.80%
InvestinPoker emerging markets, Woodford -9%


What I really want to know, is there data comparing the performance of the whole universe of managed funds, to the whole universe of investible assets?

I'm a passive kind of guy but notice I'm languishing near the bottom of the MSE league table this year. If there is evidence that active management broadly outperforms, then I might be up for a bit of it.

If there is no evidence that active management outperforms overall- and I have no confidence in my ability to pick between active managers- then I reckon I should stick to the cheaper option of index funds.

(Actually what I am suspecting is that like in so many other situations, the middle way might work well: 50% active 50% passive?)

grey_gym_sock

racing_blue wrote: »

What I really want to know, is there data comparing the performance of the whole universe of managed funds, to the whole universe of investible assets?

would that info help?

the whole universe of investible assets is currently something like 60% bonds, 40% equities. you probably have good reasons to use a different equities/bonds split, regardless of whether you're using active or passive.

also, returns are generally affected far more by choice of world region / sector specialism / big vs small cap / targeting "styles" such as value / whether to hedge currency, than by whether you use active or passive. making any of these choices will "tilt" your portfolio away from the global investible assets portfolio. and you probably have good reasons to make some such choices.

i think it is more meaningful to compare active vs passive returns only within a defined niche, e.g. US big cap equities, or UK investment grade corporate bonds, or japanese small cap value equities with currency hedging, or whatever.

incidentally, my passive funds/ETFs did a lot better than my active funds/ITs over the last year - i.e. went up rather than down - though that doesn't really tell me anything. individual shares did better still. individual bonds did nothing much.

TheTracker

racing_blue wrote: »

What I really want to know, is there data comparing the performance of the whole universe of managed funds, to the whole universe of investible assets?

I'm a passive kind of guy but notice I'm languishing near the bottom of the MSE league table this year.

Performance can be measured in so many ways. You have the average performance of each invested dollar, the average performance of a fund, the average performance of a security (stock etc), the average performance of an investor. They can all be different. I think the first one is the most important in terms of the question you are trying to answer.

The whole investable universe is made of many parts. Not just the open public stock and bond funds, but private property, commodities, private companies, micro companies,and more esoteric alternative vehicles like art and collectives. I think stocks and bonds are what you are talking about, since the returns you mention are in that part of the universe.

In 2015 the global market of major asset classes returned -1.4%, according to this source.

I would measure myself against that global return sooner than a random sampling of MSE'ers or the FTSE100.

Now if you had some targeted strategy you may wish to measure against something different from a global cap weighted return. For instance, if your strategy was all about actively managed funds selected on the basis of value then you may wish to compare yourself against the average in that field, as measured by a tracker. Or if you chose to avoid the US completely then you may look at the global return ex-US before comparison.

That's the beauty of a portfolio comprised of a well balanced allocation of passive trackers. You don't need to compare yourself against others because your return is very close to the average for that allocation by definition. Instead, you may wish to measure your return in terms of the fees you needed to spend to reach that average return. No end of year hand wringing and consternation about how you fit in a league table.

Of course this is all annual inspection. On a multi year time frame the winners and losers tend to average out. So while a passive portfolio may well always be around the 45-55% area on a single year league table, research shows that on horizons of 10 or 20 or 30 years a buy and hold portfolio of the same constitution rises up to the top few percentiles. You could play a game of actively managed fund frogged to stay with the top players for decades but good luck in choosing who and when if you don't have inside knowledge.

gadgetmind

I mainly look at my performance once a year. I compare the total of all my pots to "last year + 5% + new money" to see whether I'm on track or not. For the last few years, I've been wall ahead, last year not so much. But it won't take much of an uptick for the "new money" that's gone in at lower prices to perk things up.

Glen_Clark

gadgetmind wrote: »

I think it could actually be focused a little more and propose "pin-striped trousered".

The more we can get rid of these layers of over-paid middlemen, and get closer to the actual assets (you know, the things that actually generate the returns) then the better off everyone (except the middlemen, world's tiniest violin) will be.

Be careful what you wish for. Take that to its logical conclusion and all shares would be held in index ETFs costing 0.07%pa. But with no direct shareholders who would set valuations for the shares? Who would turn up at shareholder meetings to hold overpaid underperforming management to account? or vote down their hideously expensive aquisitions?

Glen_Clark

gadgetmind wrote: »

I mainly look at my performance once a year. I compare the total of all my pots to "last year + 5% + new money" to see whether I'm on track or not. For the last few years, I've been wall ahead, last year not so much. But it won't take much of an uptick for the "new money" that's gone in at lower prices to perk things up.

Inflation?
I compare my pot to inflation to see if its made or lost money. Problem of course is getting a reliable measure of inflation when Government inflation statistics ignore politically inconvenient things like house prices.