Woodford Concerns

Sailtheworld

eskbanker wrote: »

Buying sensibly-diversified funds instead of the underlying equities eliminates the need for the purchaser to conduct vast amounts of research, massive volumes of individual transactions and then all the ongoing rebalancing. If/when all that activity is properly costed, it would astonish me if the fund model came out more expensive than the deconstructed equivalent....

I'm not claiming that all funds are equal value for money though!

I'm coming from the angle of comparing the costs of a tracker fund vs an actively managed fund. In one case you're paying to track an index and in the other you're paying more for the same thing because most active funds are nothing more than proxy trackers with a few tweaks to give an illusion of added value.

I would've thought the main market for active funds would be those that are a bit more specialist than trackers can provide like Woodford and its eclectic holdings.

itwasntme001

Sailtheworld wrote: »

I'm coming from the angle of comparing the costs of a tracker fund vs an actively managed fund. In one case you're paying to track an index and in the other you're paying more for the same thing because most active funds are nothing more than proxy trackers with a few tweaks to give an illusion of added value.

I would've thought the main market for active funds would be those that are a bit more specialist than trackers can provide like Woodford and its eclectic holdings.

I am not so sure most active funds are just closet trackers, but even if most were, you would chose the ones that were not as that would be the whole point in active investing in the first place. There are many i know that are not closet trackers.


Define specialist?


Active investing will never go away and can never go away. The incentives are just too good to pull investors in and for fund managers to go into to earn their fees. Whilst many underperform, the trick is to try find the ones that you think will and stick with it until you think it is not for you. I do not see anything wrong with this except of course its harder said then done - but then trying to outperform will always come at some "price". There is no free lunch in all this.

redux

Sailtheworld wrote: »

Almost all cars are designed to work perfectly adequately on unleaded with premium unleaded delivering no benefits whatsoever. It's a product for people with high performance cars, mugs or to catch out the people, like me, who fill up with it by mistake.

The point I'm making is the fund industry is designed for people who don't mind paying more for something which can be purchased for less. If you don't like the super unleaded analogy I'm sure there are plenty of others that will work. There are plenty of people who pay a premium for added value when that added value is nothing more than a perception. It's how branding works and it applies to the financial industry too.

Untrue. Fuels of differing octane rating will perform slightly differently, as bowlhead already suggested.

In the old days of two star to five star, pinking would ensue if you put two star in a car designed to run on five star.

Modern cars can electronically adjust the ignition timing to avoid this. But there is still a difference in the fuel performance between 95 and 98 octane, and probably worth using the latter for cars designed for it.

As for whether your metaphor carries across, I don't think so. It isn't just fancy marketing of white label wrappers. I'm much more in line with what eskbanker says just above. Sometimes let some experts do a job more efficiently so I won't need to spend more time doing less well.

Sailtheworld

itwasntme001 wrote: »

I am not so sure most active funds are just closet trackers, but even if most were, you would chose the ones that were not as that would be the whole point in active investing in the first place. There are many i know that are not closet trackers.

I'd suggest most pension funds are invested in nothing more than closet trackers. There are literally thousands of them.

itwasntme001 wrote: »

Define specialist?

Anything that isn't a broad based index tracker (real or closet).

Things where you think you have an edge and want broader than single stock exposure but it's cheaper via a fund. Specific sectors, industries, market caps, flavour of the month strategies etc.

itwasntme001 wrote: »

Active investing will never go away and can never go away. The incentives are just too good to pull investors in and for fund managers to go into to earn their fees. Whilst many underperform, the trick is to try find the ones that you think will and stick with it until you think it is not for you. I do not see anything wrong with this except of course its harder said then done - but then trying to outperform will always come at some "price". There is no free lunch in all this.

I think this is a given. There's so much money at stake fund managers can afford to keep selling the idea that they add value and Joe Bloggs can pick out those that do.

Sailtheworld

redux wrote: »

Untrue. Fuels of differing octane rating will perform slightly differently, as bowlhead already suggested.

In the old days of two star to five star, pinking would ensue if you put two star in a car designed to run on five star.

Modern cars can electronically adjust the ignition timing to avoid this. But there is still a difference in the fuel performance between 95 and 98 octane, and probably worth using the latter for cars designed for it.

OK. I'll change the analogy. Active funds, in the main, are for people who like paying a bit more for the same thing like people who buy bottled water. Cue argument about taste, chlorine, minerals etc.

redux wrote: »

As for whether your metaphor carries across, I don't think so. It isn't just fancy marketing of white label wrappers. I'm much more in line with what eskbanker says just above. Sometimes let some experts do a job more efficiently so I won't need to spend more time doing less well.

You've expressed that better than I did. In an awful lot of cases (most?) an active fund is nothing more than fancy marketing of white label wrappers.

Scottish Widows pick up a big chunk of workplace pension business and have at least a hundred 'different' funds. They even have the same names except for A, B, C, D and Series 1 - 4 etc. Managed fund this, cautiously optimistic fund that - it's BS. All strangely exactly tracking World / UK markets. There's a cap on what they charge but it's still more than double what you'd pay for a proper tracker.

Nothing wrong with using experts but some of this is like looking for a central heating installer but choosing to pay a bit more because they've got a blue van.

redux

Sailtheworld wrote: »

OK. I'll change the analogy. Active funds, in the main, are for people who like paying a bit more for the same thing like people who buy bottled water. Cue argument about taste, chlorine, minerals etc.



You've expressed that better than I did. In an awful lot of cases (most?) an active fund is nothing more than fancy marketing of white label wrappers.

Scottish Widows pick up a big chunk of workplace pension business and have at least a hundred 'different' funds. They even have the same names except for A, B, C, D and Series 1 - 4 etc. Managed fund this, cautiously optimistic fund that - it's BS. All strangely exactly tracking World / UK markets. There's a cap on what they charge but it's still more than double what you'd pay for a proper tracker.

Nothing wrong with using experts but some of this is like looking for a central heating installer but choosing to pay a bit more because they've got a blue van.

Why are you searching amongst a series of irrelevant metaphors?

Why are you trying to have an argument about active versus passive funds on a thread where this isn't relevant either?

Woodford wasn't running a closet tracker on any of his funds or trusts, and the difference in performance is not due to his firm's fees, but his stock selection choices. What you are saying just doesn't belong to this context.

Sailtheworld

redux wrote: »

Why are you searching amongst a series of irrelevant metaphors?

I thought it was funny how an analogy about petrol was seized upon so I added the one about blue vans for fun - sorry.

redux wrote: »

Why are you trying to have an argument about active versus passive funds on a thread where this isn't relevant either?

Woodford wasn't running a closet tracker on any of his funds or trusts, and the difference in performance is not due to his firm's fees, but his stock selection choices. What you are saying just doesn't belong to this context.

Because I think this could be a valuable wake-up call for the sad faced people in the Daily Mail and on TV. They wanted passive risk and the chance of super duper special situations endorsed by Brad Pitt returns. The fund industry is all too willing to sell them the dream.

bowlhead99

Sailtheworld wrote: »

Because I think this could be a valuable wake-up call for the sad faced people in the Daily Mail and on TV. They wanted passive risk and the chance of super duper special situations endorsed by Brad Pitt returns.

It does appear that they got what they wished for. The opportunity to sit back passively while a contrarian investment manager did all the investment selection and occasionally exposed them to a holding company to which a celebrity had made a philanthropic contribution.

Unfortunately it didn't end in a positive result.

itwasntme001

bowlhead99 wrote: »

Unfortunately it didn't end in a positive result.

Now that is an understatement!

bowlhead99

itwasntme001 wrote: »

Now that is an understatement!

Well, I'm not trying to make a sensationalist headline for a tabloid, so best to just be factual