What % of your portfolio are active vs passive funds?

bostonerimus

cloud_dog wrote: »

So, are we saying that passive providers/funds should be thankful to the exceedingly large number of active managed funds because they make them look better than perhaps they are?

<<tongue ----> cheek>>

That's what I say everyday.....tongue firmly out of cheek.

Prism

Just pick one of the 10% that do well. Jobs a goodun!

[Deleted User]

I like passive funds, cheap, lowish risk, but I've been reading their rise could cause "inefficient" markets. As if everyone is investing in an index, it means the share price of said index companies, isn't really traded actively and this could cause problems in the future. I personally can only see a problem, if passive funds reach around 75%+ of the market capitalisation.

Also, synthetic ETFs, I can't believe people invest in them. I saw one for a latin america index, and it was basically just swapped with other random assets so you weren't investing in it at all. Scary stuff.

Linton

Johnnyboy11 wrote: »

You don't need to analyse the article, just look at the bar chart which speaks for itself. Circa 90% of fund managers underperforming their benchmark over a range of fund types over 15 years. Staggering.

Indeed, if you have found a statistic that matches your preconceptions why look further? If you did look further you may well find that those numbers cannot possibly be true for the UK Small Companies Sector.



For a start many SC funds dont have a benchmark but the majority are doing well beating the FTSE Small Cap index. There is only one tracker fund available as far as I can see, the iShare MSCI UK Small Cap Index fund. However this index includes a significant number of companies which are too large to meet the definition of the UK Small Cap Sector including some FTSE100 members.


It should be pretty easy for an active fund to beat a small cap index since the index will contain many rarely traded, possibly nearly moribund companies that no rational manager would touch.

Linton

newbinvestor wrote: »

I like passive funds, cheap, lowish risk, ...

Its a common newbie error to think that a tracker is inherently less risky than a managed fund. This just uisnt true - a tracker is as risky as the market as a whole. An actvely managed fund can employ strategies to lower the risk.

MaxiRobriguez

Linton wrote: »

It should be pretty easy for an active fund to beat a small cap index since the index will contain many rarely traded, possibly nearly moribund companies that no rational manager would touch.

Hello my name is Neil Woodford, you called?

Linton

MaxiRobriguez wrote: »

Hello my name is Neil Woodford, you called?

True, not so easy if you have £10B to invest. Fortunately normal SC funds are much smaller.

aroominyork

Prism wrote: »

Typically funds that don't beat the market are smaller because either people don't invest in them or they take the money out of them. Difficult to quantify. The main point is that the stats that say 90% of active funds fail to beat the index is irrelevant if nobody uses them

bowlhead99 wrote: »

I think the question being posed is: I hear the total quantity of active funds that fail to beat 'the market' is nine out of ten, but does that mean the total volume of active investors' money that fails to beat the market is also 90%, or could it be that perhaps (e.g.) half of the investors' money actually deployed into active funds does better than a tracker..

Yes, that's exactly my point. Is there any data about the proportion of actively managed money - as opposed to actively managed investment funds - which is beating its benchmark?

londoninvestor

aroominyork wrote: »

Yes, that's exactly my point. Is there any data about the proportion of actively managed money - as opposed to actively managed investment funds - which is beating its benchmark?

You could even subdivide that further

1. What proportion of money in actively managed retail "funds" (broadly defined, including ETFs and ITs, but only products available to individual small investors) beats the benchmark?
   
2. What proportion of actively managed money overall - which includes hedge funds, family offices, university endowments etc etc etc - beats its benchmark?

(b) is in some sense more reflective of the advantage or otherwise of active management, but (a) might better represent a retail investor's chance of beating the market.

Audaxer

Linton wrote: »

Its a common newbie error to think that a tracker is inherently less risky than a managed fund. This just uisnt true - a tracker is as risky as the market as a whole. An actvely managed fund can employ strategies to lower the risk.

That's true. However for a new, inexperienced or more cautious investor going down the DIY route, a multi asset fund of passive indexes like VLS, can be less of a risk and less stressful than trying to select and successfully manage a portfolio of active funds.