Baillie Gifford American - ouch!!

george4064

If you feel like you’ve made a ‘complete clanger’ when your highly concentrated active equity fund drops 10% then investing isn’t for you!

Steve182

george4064 said:

If you feel like you’ve made a ‘complete clanger’ when your highly concentrated active equity fund drops 10% then investing isn’t for you!

I completely concur with that. I've made a few similar (actually bigger) clangers, which almost always occur when stupidly chasing past winners....

JohnWinder

dunstonh said:

Yes I'm aware this (successful stock picking fund manager giving up his job) is a major risk with an actively managed fund over a tracker/index. 

No its not.    The risk is in the underlying assets.

Indeed, the risk is in the underlying assets but those little monkeys don’t jump into the fund by themselves, they’re chosen by the fund manager. Unless I'm missing something here one might well imagine a potential risk here. Can we dismiss this perceived risk?

If the manager’s success relative to other managers has been through skill, his leaving must be a risk, it seems to me. If his success is due to luck, then there’s no risk. So, does Tom Slater have skill, luck or both and how much of each? And if it’s enough skill to compensate for any bad luck, how do we identify it?

If I can put UK exceptionalism in financial management aside for a moment, Powell writes: 'There have been several academic studies in the US — notably by Michael Jensen in 1968, Burton Malkiel in 1995 and by Barras, Scaillet and Wermers in 2010 — which have all found that outperformance is more likely to be due to luck than skill.'

https://www.evidenceinvestor.com/do-fund-managers-who-outperform-possess-genuine-skill/

The research leaves room for some uncertainty I think, so I don’t think we can say, straight out, that there’s no risk from a fund manager leaving, because it may not be all luck that produced their results.

Linton

JohnWinder said:

dunstonh said:

Yes I'm aware this (successful stock picking fund manager giving up his job) is a major risk with an actively managed fund over a tracker/index. 

No its not.    The risk is in the underlying assets.

Indeed, the risk is in the underlying assets but those little monkeys don’t jump into the fund by themselves, they’re chosen by the fund manager. Unless I'm missing something here one might well imagine a potential risk here. Can we dismiss this perceived risk?

Yes - I choose a fund because of its underlying assets and the proportions in which they are held.  These should tie in with any stated objectives of the fund.  That is why I would rarely choose a passive fund.  Your strawman model that one chooses an active fund at random and relies on the manager to make good guesses from nX1000s possible investments is far from reality.

There is the risk that the manager goes off-piste but I have never met it.

Bobziz

Linton said:

JohnWinder said:

dunstonh said:

Yes I'm aware this (successful stock picking fund manager giving up his job) is a major risk with an actively managed fund over a tracker/index. 

No its not.    The risk is in the underlying assets.

Indeed, the risk is in the underlying assets but those little monkeys don’t jump into the fund by themselves, they’re chosen by the fund manager. Unless I'm missing something here one might well imagine a potential risk here. Can we dismiss this perceived risk?

Yes - I choose a fund because of its underlying assets and the proportions in which they are held.  These should tie in with any stated objectives of the fund.  That is why I would rarely choose a passive fund.  Your strawman model that one chooses an active fund at random and relies on the manager to make good guesses from nX1000s possible investments is far from reality.

There is the risk that the manager goes off-piste but I have never met it.

Does the fact that you can only see a limited number of the stocks held in a fund make it difficult.to confirm whether a manager is going off-piste ?

Linton

Bobziz said:

Linton said:

JohnWinder said:

dunstonh said:

Yes I'm aware this (successful stock picking fund manager giving up his job) is a major risk with an actively managed fund over a tracker/index. 

No its not.    The risk is in the underlying assets.

Indeed, the risk is in the underlying assets but those little monkeys don’t jump into the fund by themselves, they’re chosen by the fund manager. Unless I'm missing something here one might well imagine a potential risk here. Can we dismiss this perceived risk?

Yes - I choose a fund because of its underlying assets and the proportions in which they are held.  These should tie in with any stated objectives of the fund.  That is why I would rarely choose a passive fund.  Your strawman model that one chooses an active fund at random and relies on the manager to make good guesses from nX1000s possible investments is far from reality.

There is the risk that the manager goes off-piste but I have never met it.

Does the fact that you can only see a limited number of the stocks held in a fund make it difficult.to confirm whether a manager is going off-piste ?

You can see the top 10 which is enough for the purpose.  Provided the top 10 doesnt show that too much money is going into a small number of companies far more important is the allocations to sectors.  For example a manager could be chasing returns by excessive (for my strategy) investing in higher risk areas. 

You can get allocation problems with passive funds.  I was investigating a passive ETF alternative to my tech fund and came across SPDR Global Technology.  It is 18% Apple and 15% Microsoft.  Surely there are sufficient investment opportunities in tech throughout the world for it not to be necessary to put 1/3rd of your money into 2 companies.  If it was an active fund it would be seen as highly risky investing.

Prism

Bobziz said:

Linton said:

JohnWinder said:

dunstonh said:

Yes I'm aware this (successful stock picking fund manager giving up his job) is a major risk with an actively managed fund over a tracker/index. 

No its not.    The risk is in the underlying assets.

Indeed, the risk is in the underlying assets but those little monkeys don’t jump into the fund by themselves, they’re chosen by the fund manager. Unless I'm missing something here one might well imagine a potential risk here. Can we dismiss this perceived risk?

Yes - I choose a fund because of its underlying assets and the proportions in which they are held.  These should tie in with any stated objectives of the fund.  That is why I would rarely choose a passive fund.  Your strawman model that one chooses an active fund at random and relies on the manager to make good guesses from nX1000s possible investments is far from reality.

There is the risk that the manager goes off-piste but I have never met it.

Does the fact that you can only see a limited number of the stocks held in a fund make it difficult.to confirm whether a manager is going off-piste ?

Although only updated every six months you can see all of the holdings of most funds in the annual and semi annual reports. I use these to help determine how much chopping and changing the fund manager undertakes outside of the top 10.

JohnWinder

Linton said:

You can get allocation problems with passive funds.  I was investigating a passive ETF alternative to my tech fund and came across SPDR Global Technology.  It is 18% Apple and 15% Microsoft.  ... If it was an active fund it would be seen as highly risky investing.

Indeed you can with passive funds. That's why it's a bit important to consider the index any fund is tracking. Indexes like that one are pop-ups to ride the wave of a booming stock sector or region, it was Japan 30 years ago; this one looks like it's 5 years old.

Everyone gains: the index making company who licenses the index; the fund company that follows the index; the fund managers; some advisors; the media that touts it; just not always the investors when the sector or region 'reverts to mean returns'. Then everyone moves on to another index, fund and cohort of investors.

'There are nearly 3.3 million stock market indices around the world, according to new research from the Index Industry Association (IIA).' https://www.ii.co.uk/analysis-commentary/there-are-now-70-times-more-stock-market-indices-listed-stocks-world-ii512651 

Look for widely diversified by sector, region and capitalisation, cap weighted, sensible looking if not well established, at least for starters.

[Deleted User]

• BAILLE GIFFORD AMERICAN FUND 
• TOP 10 HOLDINGS                                         PRICE 1778p

Security                                    Price	Weight
SHOPIFY INC                           1108	7.37%
WAYFAIR INC                            305	6.45%
AMAZON.COM INC                 3291	5.84%
TRADE DESK INC(THE)           661	4.96%
TESLA INC                                 672	4.66%
ROKU INC                                 317	4.19%
TWILIO INC                               307	4.01%
NETFLIX INC                             503	3.78%
ZOOM INC	295    3.33%
ILLUMINA INC                             384	2.87%

    

[Deleted User]

Quite a racy set of investments above. All of them are up in £ terms over the last year though. Too risky for me but, if they appeal, why not just buy the top 10 holdings?