Managed or Tracker fund, which is best?

Prism

Linton wrote: »

I think the main reason for the wider variation in the active portfolios is that they have a wider range of objectives and investment styles. At the extreme Linton WP is intended to make a small gain at least matching inflation but be fairly immune to major falls. I added it to the list in the hope that we would see a major fall, but sadly we havent.

It seemed to do a reasonable job during last last 3 months of 2018, falling around 5% while VLS60 fell about 6.5% and mine about 15% (mostly down to a high smaller company exposure)

From my point of view Fundsmith fell 9.5% while the VG FTSE All fell about 12.5%, which is what I would expect. Makes me think I should stop messing with these smaller companies funds and just go all in FS

[Deleted User]

What “returns” is everyone talking about? Money-weighted or time weighted? Could be comparing apples and pears. Generally, comparisons should be for time-weighted returns; otherwise you are focusing on timing of cash flows rather than portfolio make up.

beamyup

Update - what did i learn from this thread?

A genuine "Thank You" everyone for your responses. They have helped me think through my plans.

I plan to rearrange my portfolio to be:

• 50% Fidelity Total Market Index Fund
• 40% Vanguard Global Value Factor UCITS ETF
• 10% (max) "Opportunity fund" ( I like to take short term opportunities and have been successful so far) - when not in use this will form part of the Fidelity Total Market Index Fund - taking that to 60%

This is a vast simplification of the 10-15 funds and shares I own at the moment.

I believe this to be quite volatile and high risk (so needs to be kept long term), also there is a lot of currency and US tech stock risk but that is inevitable.

There is quite a big correlation between my 2 funds but I am ok with that.

As i near retirement I will likely move some or all to one of the vanguard lifestrategy funds.

I use AJBELL at the moment, my total SIPP is currently £500k with additional £40k per annum, I am 54 and plan to start to slow down in gradually from work in about 5 years time.

Linton

Deleted_User wrote: »

What “returns” is everyone talking about? Money-weighted or time weighted? Could be comparing apples and pears. Generally, comparisons should be for time-weighted returns; otherwise you are focusing on timing of cash flows rather than portfolio make up.

There is no perfect method, it depends on what you are trying to achieve. Some of the issues are discussed at https://www.blueleaf.com/performance-reporting-choices-simplified/, (Thanks Google!). Anything I and probably most others quote is IRR as it is easier to calculate which MS Money or Excel can do automatically, but I wouldnt publicly quote a figure at all where there had been major movements of capital. IRR is also, I believe, most useful in understanding one's portfolio performance as a whole.


GBIO is based on dummy portfolios where there is no movement of capital.

AnotherJoe

beamyup wrote: »

Update : Summary of responses

There have been many responses to this thread which I will try to summarise here.

Many posters did not respond to my question for data, instead they simply relayed their views. This is interesting as many of the posters in this category were the most respected posters on these forums. most of these views fell into these categories

I think you discounted the fact that those views were based on reports / analyses which were based on data. But we dont have access to that data, and believe the authors who did do the analysis.

To use a current analogy, i believe there's a black hole at the centre of our galaxy.
I believe that on the basis of reports by eminent people who seem of good standing who have based that on data they have collected and collated.
I dont have access to that data nor the time or expertise to pore through it to check their conclusions, they seem to ahve no reason to come up with fake reports, plus there have been many such studies with similar results.
And that of course is where most of our beliefs are derived from, not from the raw data, but from others analyses.
I haven't conducted ?Eratosthenes? experiments on the angle of the sun at different locations, or used raw GPS data to validate timing and location of various places.
I do though believe on the basis of those and other outputs that the earth is a globe of aprox 25k miles circumference.
If I asked you to show me the raw data on which you also presumably believe the earth is a globe, you'd probably think I was a t**t.

[Deleted User]

Portfolios should be compared using time weighted returns. IRR is to monitor one’s actual performance and shouldn’t be used for comparison vs benchmarks . It is true that if there are no meaningful cash movrments then it does not matter.

I track both measures, but only over the last 3 years. There is definitely a difference between MWR and IRR (over 1%). My 3-year time-weighted return (to the end of March) is 10.3% (annualised). I would expect portfolios counted in GBP to have large advantage over this period because pound fell quite dramatically.

beamyup

AnotherJoe wrote: »

I think you discounted the fact that those views were based on reports / analyses which were based on data. But we dont have access to that data, and believe the authors who did do the analysis.
.

I know this subject has been discussed so many times so i was trying to get hold of good analysis to counter / defend the good analysis (i think) in the 2 pdfs up top.
Nobody shared any links to any other analysis to but to be fair maybe that was because instead they quoted good books. As i did not own these to be fair I could have bought based on the recommendation.

[Deleted User]

beamyup wrote: »

Update - what did i learn from this thread?

A genuine "Thank You" everyone for your responses. They have helped me think through my plans.

I plan to rearrange my portfolio to be:

• 50% Fidelity Total Market Index Fund
• 40% Vanguard Global Value Factor UCITS ETF
• 10% (max) "Opportunity fund" ( I like to take short term opportunities and have been successful so far) - when not in use this will form part of the Fidelity Total Market Index Fund - taking that to 60%

This is a vast simplification of the 10-15 funds and shares I own at the moment.

I believe this to be quite volatile and high risk (so needs to be kept long term), also there is a lot of currency and US tech stock risk but that is inevitable.

There is quite a big correlation between my 2 funds but I am ok with that.

As i near retirement I will likely move some or all to one of the vanguard lifestrategy funds.

I use AJBELL at the moment, my total SIPP is currently £500k with additional £40k per annum, I am 54 and plan to start to slow down in gradually from work in about 5 years time.

I don’t know the exact make-up but looks like there are no bonds? That’s... Unusual for a 54 year old with a 6 year timeline to retirement

Also, some home bias is usually jusified. Do you have any? Vanguard has another good paper on home bias.

Linton

Deleted_User wrote: »

Portfolios should be compared using time weighted returns. IRR is to monitor one’s actual performance and shouldn’t be used for comparison vs benchmarks . It is true that if there are no meaningful cash movrments then it does not matter.

I track both measures, but only over the last 3 years. There is definitely a difference between MWR and IRR (over 1%). My 3-year time-weighted return (to the end of March) is 10.3% (annualised). I would expect portfolios counted in GBP to have large advantage over this period because pound fell quite dramatically.

I dont see that in real life worrying about performance at that level of detail or is of anything other than passing or academic interest. You may get 1% difference in reported returns over a shortish time period just by moving the start and end dates by a week or two. What matters practically is whether the long term performance is meeting ones objectives at an acceptable risk. IRR is the appropriate tool for that purpose.



As far as the GBIO is concerned all except one of us are investing in £s, and even then the $ results are converted to £s before comparison.

k6chris

Lots of academic stuff on Google Scholar


https://scholar.google.co.uk/scholar?hl=en&as_sdt=0,5&q=managed+funds+performance


Change the search criteria to suit!