has this bolted Baillie Gifford American fund

Cus

The fundamental issues are that certain styles/strategies do well in certain environments so in order to justify active funds, you HAVE to outperform the market which means you HAVE to choose the style that works for the current climate.  Together with the fact that investing is just about the most competitive strategy game there is and that no one can consistently forecast the economy, you won't get many long term star equity fund managers (in fact I can't think of any in the UK).

So you have a situation where nearly all the active funds held by retail investors have not really been around for that long - perhaps over just 1 or 2 economic regimes so it is far too early to tell whether these were genuine long term performers or just got luckily with their style persisting.

The problem is you will only be able to find out if it is the former with hindsight, and by then you would have missed the good gains (you can't buy previous performance) and the star fund manager would have aged and be closer to retirement so the fund wouldn't be a long term holding anyway.

So the only thing sensible to invest in for equities for the long term is a passive index tracker fund.

Are you saying that the only way to identify a non lucky active fund is by hindsight and by then you have missed the good gains?
If so, would you suggest that anyone who got into that fund earlier is lucky or do you think that such a fund can be identified (well at least more often than randomly/on average)
Would someone who can more often than not find these active funds only be institutional investors?

Prism

Cus said:

The fundamental issues are that certain styles/strategies do well in certain environments so in order to justify active funds, you HAVE to outperform the market which means you HAVE to choose the style that works for the current climate.  Together with the fact that investing is just about the most competitive strategy game there is and that no one can consistently forecast the economy, you won't get many long term star equity fund managers (in fact I can't think of any in the UK).

So you have a situation where nearly all the active funds held by retail investors have not really been around for that long - perhaps over just 1 or 2 economic regimes so it is far too early to tell whether these were genuine long term performers or just got luckily with their style persisting.

The problem is you will only be able to find out if it is the former with hindsight, and by then you would have missed the good gains (you can't buy previous performance) and the star fund manager would have aged and be closer to retirement so the fund wouldn't be a long term holding anyway.

So the only thing sensible to invest in for equities for the long term is a passive index tracker fund.

Are you saying that the only way to identify a non lucky active fund is by hindsight and by then you have missed the good gains?
If so, would you suggest that anyone who got into that fund earlier is lucky or do you think that such a fund can be identified (well at least more often than randomly/on average)
Would someone who can more often than not find these active funds only be institutional investors?

I would suggest that once you strip out the vast amount of obvious dross funds run by all of the pension companies and banks (with a few exceptions) then you have a decent chance of picked a decent fund from what is left.

Audaxer

itwasntme001 said:

robatwork said:

itwasntme001 said:

Makes you wonder in 10 years when we will all be investing in Woodford because value may very well be the fashion by then.

The fact that 2 of the most respected names that I was invested with in the financial industry (I speak as a layman) in Equitable Life and Neil Woodford both went tits up, makes it very hard to a) take a reputation or S&P rating seriously and b) know where the next bubble is.

So you have a situation where nearly all the active funds held by retail investors have not really been around for that long - perhaps over just 1 or 2 economic regimes so it is far too early to tell whether these were genuine long term performers or just got luckily with their style persisting.

So the only thing sensible to invest in for equities for the long term is a passive index tracker fund.

While that may be the case with a lot of active funds, there are a lot of popular ITs that have been around for decades - some for over 100 years - so you can establish quite easily if they are good long time performers. But if you prefer not to go with active funds or ITs, I agree there is nothing wrong with choosing passive index trackers or multi asset funds containing index trackers.  

reefer37

thanks for the post guys
i have opted in but will only be about 5-10% of my portfolio as stated here will completement this with my other north american fund. 
also i have to have it in fund form as can by it indiviual in my pension plan
thanks for all the comments

BuildTheWall

robatwork said:

itwasntme001 said:

Makes you wonder in 10 years when we will all be investing in Woodford because value may very well be the fashion by then.

The fact that 2 of the most respected names that I was invested with in the financial industry (I speak as a layman) in Equitable Life and Neil Woodford both went tits up, makes it very hard to a) take a reputation or S&P rating seriously and b) know where the next bubble is.

Respected by who? Woodford was over hyped by HL’s marketing and he invested an open ended fund in less liquid investments. 

BuildTheWall

itwasntme001 said:

Over the last few months I have been hearing from a few people I know that they have bought or will be looking to buy SMT because they view it as an amazing fund.  Not saying I disagree with that at all, the fund managers have certainly proved that they are good stock pickers, it is just that when you have people who showed literally 0 interest in stocks just a year prior, it makes you stop and think whether the high growth style funds/stocks are a bit bubbly...

I did sell some of my SMT very recently - it just got too much of a weighting in my portfolio.

People had zero interest in stocks earlier as bonds and savings accounts were providing decent returns. Now those two avenues have dried up, all other assets are entering bubble territory- equities, crypto, residential property etc. 

If u r not retiring in next 10 years, withdrawing from equities is not going to help. You can choose another fund if you wish, but the two arguments are different. 

robatwork

BuildTheWall said:

robatwork said:

itwasntme001 said:

Makes you wonder in 10 years when we will all be investing in Woodford because value may very well be the fashion by then.

The fact that 2 of the most respected names that I was invested with in the financial industry (I speak as a layman) in Equitable Life and Neil Woodford both went tits up, makes it very hard to a) take a reputation or S&P rating seriously and b) know where the next bubble is.

Respected by who? Woodford was over hyped by HL’s marketing and he invested an open ended fund in less liquid investments. 

Respected and "hyped" by just about every newspaper and financial article you could read in the 2000s up to 2015. An element of blowing smoke up his !!!!!! for sure, but doubtless he steered a huge fund very wisely for a decent length of time.

Not sure how old you are but Equitable Life were regarded by people my father's age and hence myself, to be the gold standard of pension companies. All stiff collars, marbled halls and fusty leather briefcases. Not satisfied with just their reputation when I chose my first pension company (pre internet) I went by their micropal and S&P 5* ratings, the highest of all the competition for reliability, sturdiness, longevity and all the factors you may look for to invest over the long term. How wrong all those ratings companies were.

I've never really trusted anyone in the financial industry since then, certainly not ratings. 

[Deleted User]

This whole thread is about a fund which bet on the most risky companies in 2020 and won the bet.  One single year. And its not on the basis of how investment type fits ones portfolio. Its on the basis of topping the chart of returns. Its not like the fund managers are doing complex calculations to estimate value of each stock. There is no formula which tells you to pick Tesla. Its not like they did lots of research on obscure and overlooked but well managed companies with moats. Every company they picked is regularly discussed by the talking heads on financial shows.

Out of >100,000 funds, one will come top every year. The probability of the same fund topping the charts next year is only slightly better than being struck by lightning. 

BuildTheWall

Deleted_User said:

This whole thread is about a fund which bet on the most risky companies in 2020 and won the bet.  One single year. And its not on the basis of how investment type fits ones portfolio. Its on the basis of topping the chart of returns. Its not like the fund managers are doing complex calculations to estimate value of each stock. There is no formula which tells you to pick Tesla. 

Out of >100,000 funds, one will come top every year. The probability of the same fund topping the charts next year is only slightly better than being struck by lightning. 

Wow, amazing insight. One fund tops the list? Never knew that! Anything else we don’t know? 

itwasntme001

BuildTheWall said:

itwasntme001 said:

Over the last few months I have been hearing from a few people I know that they have bought or will be looking to buy SMT because they view it as an amazing fund.  Not saying I disagree with that at all, the fund managers have certainly proved that they are good stock pickers, it is just that when you have people who showed literally 0 interest in stocks just a year prior, it makes you stop and think whether the high growth style funds/stocks are a bit bubbly...

I did sell some of my SMT very recently - it just got too much of a weighting in my portfolio.

People had zero interest in stocks earlier as bonds and savings accounts were providing decent returns. Now those two avenues have dried up, all other assets are entering bubble territory- equities, crypto, residential property etc. 

If u r not retiring in next 10 years, withdrawing from equities is not going to help. You can choose another fund if you wish, but the two arguments are different. 

Never said I or anyone else should withdraw from equities.  Simply saying I undertook some rebalancing in my portfolio because SMT was just too much of a weighting.

I do think however that people even retiring in 15-20 years should be mindful of sequence risk.  There is a possibility we have front loaded a lot of the gains, and if we have done that in a big way, it could be all given back over the next 10-20 years.  But will depend on what people own.