Do funds ever lose money over time?

[Deleted User]

coyrls said:

The concept of a company buying a fund makes no sense at all.  A company could buy the fund management company that manages the fund but that would make no difference to the funds managed by the fund management company.

Well right, I was just putting the two together to show their relationship in size. 
More concerning is when the ratio is reversed, as proved by the Woodford fiasco.

Chino

masonic said:

This is one reason why ITs are not generally recommended for novice investors.

Whilst that should be considered a risk factor for investing in ITs, I challenge you to present any evidence of it being a specific reason for "novice investors" not to invest in ITs. "Novice investors" - as anyone else - should be looking to invest over a period for which an IT trading at a premium or discount largely balances out.

coyrls

ZingPowZing said:

coyrls said:

The concept of a company buying a fund makes no sense at all.  A company could buy the fund management company that manages the fund but that would make no difference to the funds managed by the fund management company.

Well right, I was just putting the two together to show their relationship in size. 
More concerning is when the ratio is reversed, as proved by the Woodford fiasco.

Which was my point, you are concerned because they are too small and also concerned because they are too big.  Your only example for both cases seems to be Woodford.

Thrugelmir

coyrls said:

ZingPowZing said:

coyrls said:

The concept of a company buying a fund makes no sense at all.  A company could buy the fund management company that manages the fund but that would make no difference to the funds managed by the fund management company.

Well right, I was just putting the two together to show their relationship in size. 
More concerning is when the ratio is reversed, as proved by the Woodford fiasco.

Which was my point, you are concerned because they are too small and also concerned because they are too big.  Your only example for both cases seems to be Woodford.

Who now is being vindicated. 

Nebulous2

Thrugelmir said:

coyrls said:

ZingPowZing said:

coyrls said:

The concept of a company buying a fund makes no sense at all.  A company could buy the fund management company that manages the fund but that would make no difference to the funds managed by the fund management company.

Well right, I was just putting the two together to show their relationship in size. 
More concerning is when the ratio is reversed, as proved by the Woodford fiasco.

Which was my point, you are concerned because they are too small and also concerned because they are too big.  Your only example for both cases seems to be Woodford.

Who now is being vindicated. 

In what way?

My limited understanding is that some of his buys are coming good - but that still doesn't help the lack of liquidity in the fund, which shouldn't have been the case, when people wanted to withdraw.

masonic

Chino said:

masonic said:

This is one reason why ITs are not generally recommended for novice investors.

Whilst that should be considered a risk factor for investing in ITs, I challenge you to present any evidence of it being a specific reason for "novice investors" not to invest in ITs. "Novice investors" - as anyone else - should be looking to invest over a period for which an IT trading at a premium or discount largely balances out.

Agree that they should be, but many don't stick to such a plan. In the Covid crash investment forums were littered with people complaining their investment trust holdings had fallen further than the market (due to a significantly widened discount) and they had lost confidence, so were selling up. There is also a tendency for the novice investor to buy what is fashionable and ignore a temporarily high premium, which as you say, is likely to balance out and fall. This added complexity should generally be avoided until an investor has sufficient knowledge and experience to factor it in to their decisions.

Thrugelmir

Nebulous2 said:

Thrugelmir said:

coyrls said:

ZingPowZing said:

coyrls said:

The concept of a company buying a fund makes no sense at all.  A company could buy the fund management company that manages the fund but that would make no difference to the funds managed by the fund management company.

Well right, I was just putting the two together to show their relationship in size. 
More concerning is when the ratio is reversed, as proved by the Woodford fiasco.

Which was my point, you are concerned because they are too small and also concerned because they are too big.  Your only example for both cases seems to be Woodford.

Who now is being vindicated. 

In what way?

My limited understanding is that some of his buys are coming good - but that still doesn't help the lack of liquidity in the fund, which shouldn't have been the case, when people wanted to withdraw.

If there's panic selling of any volume in any market then liquidity will dry up.  Prices will fall rapidly. 

Steve182

masonic said:

ZingPowZing said:

coyrls said:

Most people's individual share holdings are worth far less than the companies in which they are invested.  I can't see how the fact that funds are worth far less than the majority of companies in which they are invested has any relevance to anything and certainly no relevance to the relative risk of holding individual shares versus funds.

If you're invested in a fund worth c £10billion -c Woodford at its peak - there is more jeopardy, more risk to the vision of a maverick 

Funds holding a load of unquoted guff can be avoided, and that sort of manager risk can be avoided by going passive.

A problem with avoiding unquoted companies is that many more companies are staying private for longer these days, so significant growth opportunities are missed by investing only in companies after they are listed.

Obviously with investment trusts liquidity is much less of an issue. 

SMT for example are allowed to invest up to 30% in unquoted (shareholders voted to increase the limit from 25% to 30% at last AGM).

I don't think it's a good idea for OEIC's to hold significant amounts in unquoted companies, or hold property for that matter. 

A_T

Steve182 said:

Thrugelmir said:

Steve182 said:

Thrugelmir said:

Steve182 said:

Thrugelmir said:

For the majority of people long term investing isn't a worry about making a positive return but more the fear of missing out. As there'll always be a sector which has performed considerably better.  To take an example Baillie Gifford have recently come to prominence (out of the pack) due to their investment in Tesla over a decade ago. The gain is now baked into the performance history tables. Probability of repeating the feat any time soon, probably zero. Yet BG funds will draw in new funds in expectation of superior returns compared to other fund management groups. The larger a fund becomes the more difficult it is to stand out from the pack. Possibly even end up underperforming. 

Certainly Tesla has been a major factor in BG's success over the past 12 months or so, but SMT outperformed indices like the S & P long before Tesla shares went skyward.

Tesla wasn't allowed to join the S&P 500 until the 21st December 2020 as didn't meet the qualification criteria. Market capitalisation alone doesn't suffice.  

In fact since it's inclusion the price has slipped backwards. Passive funds of course were forced to buy the stock in order to mirror the indexes. As wasn't just the S&P 500 that was impacted. . Making some hedge funds sizable amounts of money in the process. 

I don't dispute those facts, simply pointing out that BG's rise to prominence is not just the result of them backing Tesla.

Correct they backed Amazon as well. 

Fund managers themselves come and go. Charles Plowdon retired last week. The architect of the successful strategy. 

And Illumina too.

James Anderson has announced he is retiring April 2022.....Slater has big shoes to fill....

Baillie Gifford have an outstanding record in the Far East too - so it's not just Amazon and Tesla

Thrugelmir

A_T said:

Steve182 said:

Thrugelmir said:

Steve182 said:

Thrugelmir said:

Steve182 said:

Thrugelmir said:

For the majority of people long term investing isn't a worry about making a positive return but more the fear of missing out. As there'll always be a sector which has performed considerably better.  To take an example Baillie Gifford have recently come to prominence (out of the pack) due to their investment in Tesla over a decade ago. The gain is now baked into the performance history tables. Probability of repeating the feat any time soon, probably zero. Yet BG funds will draw in new funds in expectation of superior returns compared to other fund management groups. The larger a fund becomes the more difficult it is to stand out from the pack. Possibly even end up underperforming. 

Certainly Tesla has been a major factor in BG's success over the past 12 months or so, but SMT outperformed indices like the S & P long before Tesla shares went skyward.

Tesla wasn't allowed to join the S&P 500 until the 21st December 2020 as didn't meet the qualification criteria. Market capitalisation alone doesn't suffice.  

In fact since it's inclusion the price has slipped backwards. Passive funds of course were forced to buy the stock in order to mirror the indexes. As wasn't just the S&P 500 that was impacted. . Making some hedge funds sizable amounts of money in the process. 

I don't dispute those facts, simply pointing out that BG's rise to prominence is not just the result of them backing Tesla.

Correct they backed Amazon as well. 

Fund managers themselves come and go. Charles Plowdon retired last week. The architect of the successful strategy. 

And Illumina too.

James Anderson has announced he is retiring April 2022.....Slater has big shoes to fill....

Baillie Gifford have an outstanding record in the Far East too - so it's not just Amazon and Tesla

BG found themselves in the position of Tesla accounting for 8% of total funds under management across all their funds. Had little option but to reduce their holdings.