What % of your portfolio are active vs passive funds?

bostonerimus

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.

I don't like tactical investing and I don't trust anyone to use risk mitigation strategies based short term numbers and economic analysis. Asset allocation over a lifetime of investing is important and I don't what an active manager to take me off course.

Linton

bostonerimus wrote: »

I don't like tactical investing and I don't trust anyone to use risk mitigation strategies based short term numbers and economic analysis. Asset allocation over a lifetime of investing is important and I don't what an active manager to take me off course.

Active risk management can be strategic, for example by maintaining defensive allocations despite the occasional over exuberance of the market. Consider the .com boom/bust. Asset allocation is by definition an active process. A truly passive investor would leave it to the markets.

Linton

Audaxer wrote: »

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.

I agree that a passive fund can provide some protection against the biggest risk to successful investing, the investors own actions. However an active multi asset fund would achieve the same objective. And of course, if one was so minded, one could come a complete cropper investing solely in passive funds. Eg putting everything in a NASDAQ tracker in 1999.
PS or IUKD in 2007.

aroominyork

londoninvestor wrote: »

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.

Also, is there any data on what proportion of questions on this forum are answered with another question? My guess is way above the benchmark for normal conversation, but that’s good, because there’s no point answering an uninformed question and risk sending the questioner down the wrong path. Anyway, let’s start with a. (any takers?) and then move on to b.

stphnstevey

Linton wrote: »

I agree that a passive fund can provide some protection against the biggest risk to successful investing, the investors own actions. However an active multi asset fund would achieve the same objective. And of course, if one was so minded, one could come a complete cropper investing solely in passive funds. Eg putting everything in a NASDAQ tracker in 1999.
PS or IUKD in 2007.

Your not comparing apples with apples there!

You can't compare a tech index with say a defensive bond fund and say the tech index is highly risky during a bust in tech!

An active tech fund would have least done as worse as a tech index in those scenarios, in fact worse as the active tech fund would have higher costs which would have eroded the returns further. With an active tech fund is likely to be more entwined with pre-IPOs which would have meant a complete loss in 1999

Linton

stphnstevey wrote: »

Your not comparing apples with apples there!

You can't compare a tech index with say a defensive bond fund and say the tech index is highly risky during a bust in tech!

An active tech fund would have least done as worse as a tech index in those scenarios, in fact worse as the active tech fund would have higher costs which would have eroded the returns further. With an active tech fund is likely to be more entwined with pre-IPOs which would have meant a complete loss in 1999

I amnot talking about niche high growth investing which encourages risk but rather about fairly general funds and corresponding indexes where the manager has the opportunity and the incentive to avoid higher risk. A good example is Woodfords Invesco Income in the period October 2007-March 2009:


FTSE 100: -38%
IUKD (UK dividend tracker):-55%
Invesco Income: -30%


or avoiding Woodford and looking at non income funds we have:
Fidelity UK Select:-32%
M&G UK Select: -31%

Audaxer

Linton wrote: »

I agree that a passive fund can provide some protection against the biggest risk to successful investing, the investors own actions. However an active multi asset fund would achieve the same objective.

For an inexperienced investor that wants to go down the DIY route, an active multi asset fund would achieve the same objective. However I don't read about many active multi asset funds that people buy as a one fund portfolio, like they do with multi asset funds of passive indexes like VLS. That might be a more interesting comparison - long term performance of a few active multi asset funds compared to VLS funds with similar levels of equities. My hunch is that VLS might have higher returns because of the lower costs?

Aminatidi

Audaxer wrote: »

For an inexperienced investor that wants to go down the DIY route, an active multi asset fund would achieve the same objective. However I don't read about many active multi asset funds that people buy as a one fund portfolio, like they do with multi asset funds of passive indexes like VLS. That might be a more interesting comparison - long term performance of a few active multi asset funds compared to VLS funds with similar levels of equities. My hunch is that VLS might have higher returns because of the lower costs?

Troy Trojan
Ruffer Total Return
Capital Gearing Trust

Those are the ones that leap to mind that have a reasonably long term track record.

Keep in mind they aren't fixed allocation they're flexible so the manager(s) have discretion to dial exposures up or down as they see fit.

As much as VLS no doubt do their job, they're still relatively new.

Audaxer

Aminatidi wrote: »

Troy Trojan
Ruffer Total Return
Capital Gearing Trust

Those are the ones that leap to mind that have a reasonably long term track record.

I these are good funds with a good history, but I would think these that most people that hold any of these funds probably hold them as part of a wider portfolio of funds. I'd be surprised if many investors would have a substantial sum invested in one of these funds, but no other investments.

Aminatidi

Hmm well they're very much pitched as "one stop shops" where people can park all or a significant amount of their wealth.

I guess it comes down to what "other investments" count as, but I'd be reasonably sure there are people for whom those are their only fund/investment trust holdings.

Being blunt I think they originated as being somewhere for the wealthy to keep a large amount of their assets.