Managed or Tracker fund, which is best?

coastline

Trustnet will give you the general picture as it stands covering recent years. Chart below the MSCI represents the major companies around the world. Over 1, 3 , and 5 years you can see a performance of 13% 50% and 83%.

https://www2.trustnet.com/Tools/Charting.aspx?typeCode=NM990100

Keeping it simple the next link shows various sectors of Unit trusts & OEIC'S. In this case we need the Global sector to compare with the MSCI World.

https://www.trustnet.com/fund/sectors/performance?universe=O

This link should show a 5 year view of the best performers. Again some of the better performers are not invested in major companies so you'll have to do a bit of research and eliminate them. A quick look shows there are probably less than 30 funds which have out performed the MSCI World Index.

https://www.trustnet.com/fund/price-performance/o/ia-unit-trusts?sector=O%253AGLBLGRTH&tab=fundOverview&pageSize=125&sortby=P60m&sortorder=desc

The answer is all up to yourself which way to go. Maybe a world tracker as a core holding with a few funds along side. ?

beamyup

coastline wrote: »

Trustnet will give you the general picture as it stands covering recent years. Chart below the MSCI represents the major companies around the world. Over 1, 3 , and 5 years you can see a performance of 13% 50% and 83%.

https://www2.trustnet.com/Tools/Charting.aspx?typeCode=NM990100

Keeping it simple the next link shows various sectors of Unit trusts & OEIC'S. In this case we need the Global sector to compare with the MSCI World.

https://www.trustnet.com/fund/sectors/performance?universe=O

This link should show a 5 year view of the best performers. Again some of the better performers are not invested in major companies so you'll have to do a bit of research and eliminate them. A quick look shows there are probably less than 30 funds which have out performed the MSCI World Index.

https://www.trustnet.com/fund/price-performance/o/ia-unit-trusts?sector=O%253AGLBLGRTH&tab=fundOverview&pageSize=125&sortby=P60m&sortorder=desc

The answer is all up to yourself which way to go. Maybe a world tracker as a core holding with a few funds along side. ?

Thanks for that - directionally it aligns i think to the vanguard analysis PDFs. with <10% of managed funds beating the index trackers.

I do not believe the data can tell us whether this will continue in future of course. but as someone posted above it isn't a bad thing to use to get to a shortlist of managed funds to consider.

If you were to make that same shortlist (of top managed funds) say 10 years ago and invested in the top 30 funds. I wonder how those funds would have performed as of today. Is that a stupid question?

[Deleted User]

That’s a great question. And the answer is: worse than the funds which underperformed. There is research on this too. Investors rush to well performing funds just when or just before they start screwing up.

Imagine a manager who is skilled in picking small pharmaceutical companies before they break through with a new drug. He makes lots of money for himself and investors. He is gonna be head hunted and move on to greener pastures. Assuming he doesn’t, his fund balloons and he now has billions to invest. A small company with its cheap shares is neither here nor there, will have no impact on his billion fund performance, even if he buys the whole company. He is now forced to invest into large caps, where he has no special advantage. Alternatively you have a market manager who is tilting to a particular factor, e g value. Great stuff, except factors have periods of over and underpermance. Right now value sucks and momentum is doing great. If you invest in a fund which has done well, chances are you will underperform going forward.

beamyup

Deleted_User wrote: »

That’s a great question. And the answer is: worse than the funds which underperformed. There is research on this too. Investors rush to well performing funds just when or just before they start screwing up.

Imagine a manager who is skilled in picking small pharmaceutical companies before they break through with a new drug. He makes lots of money for himself and investors. He is gonna be head hunted and move on to greener pastures. Assuming he doesn’t, his fund balloons and he now has billions to invest. A small company with its cheap shares is neither here nor there, will have no impact on his billion fund performance, even if he buys the whole company. He is now forced to invest into large caps, where he has no special advantage. Alternatively you have a market manager who is tilting to a particular factor, e g value. Great stuff, except factors have periods of over and underpermance. Right now value sucks and momentum is doing great. If you invest in a fund which has done well, chances are you will underperform going forward.

"That’s a great question. And the answer is: worse than the funds which underperformed. There is research on this too. Investors rush to well performing funds just when or just before they start screwing up. "

Sounds good - do you have a link to share?

[Deleted User]

beamyup wrote: »

"That’s a great question. And the answer is: worse than the funds which underperformed. There is research on this too. Investors rush to well performing funds just when or just before they start screwing up. "

Sounds good - do you have a link to share?

No, sorry. It’s from books. Don’t remember which ones - I’ve read a few. Probably Asset Allocation by Bernstein, Gibson or Ferri. They quoted research on this

Linton

Deleted_User wrote: »

Agreed. High-dividend ETFs are not passive. This is getting into factor investing and high dividends is the worst factor of all of them. Value/small/momentum/quality - all fun concepts which have better theory behind them and tend to under/over perform passive over various periods.

What is the difference between a real passive from a false one? Such funds are based on an index, a lousy one maybe, but an index nevertheless. They dont have fund managers making decisions.



Vanguard has a similar (in principle though not implementattion) income index fund based on theFTSE Equity Income Index. Are Vanguard lying when they call it an index fund?


Either way the point remains - if you want income you need a managed fund.

Linton

Deleted_User wrote: »

That’s a great question. And the answer is: worse than the funds which underperformed. There is research on this too. Investors rush to well performing funds just when or just before they start screwing up.

Imagine a manager who is skilled in picking small pharmaceutical companies before they break through with a new drug. He makes lots of money for himself and investors. He is gonna be head hunted and move on to greener pastures. Assuming he doesn’t, his fund balloons and he now has billions to invest. A small company with its cheap shares is neither here nor there, will have no impact on his billion fund performance, even if he buys the whole company. He is now forced to invest into large caps, where he has no special advantage.

That isnt how things often work. When funds are no longer able to invest all their available money in those areas the manager wishes to invest they may be closed just to new unit holders or may be closed completely. This happened frequently a few years ago with SE Asia funds. Another option well suited to investing in illiquid markets is to operate as an IT.

Alternatively you have a market manager who is tilting to a particular factor, e g value. Great stuff, except factors have periods of over and underpermance. Right now value sucks and momentum is doing great. If you invest in a fund which has done well, chances are you will underperform going forward.

You as an investor have the option of investing in a range of particular areas or sectors that have some evidence of behaving differently to the overall market - eg value, momentum, small companies etc. Then you can rebalance between the various funds buying low and selling high. With a tracker you ride the sector booms up and then loose your money in the subsequent bust.

beamyup

Linton wrote: »

You as an investor have the option of investing in a range of particular areas or sectors that have some evidence of behaving differently to the overall market - eg value, momentum, small companies etc. Then you can rebalance between the various funds buying low and selling high. With a tracker you ride the sector booms up and then loose your money in the subsequent bust.

i.e. trading your funds based upon your own personal analysis to beat the market yourself right? Is that what you mean? is that a differentiator between index and managed funds? Why can't you do that with index funds?
(personally i would not expect to be able to beat the market like this, but maybe some could)

TBC15

If you’re asking the question tracker is best for you.

beamyup

TBC15 wrote: »

If you’re asking the question tracker is best for you.

I appreciate the constructive criticism. Please elaborate further to explain your point.