What proportion of equity funds managed by your IFA are active/passive?

Hoenir

aroominyork said:

dunstonh said:

More useful, dunstonh, would be if you give some insight into your active/passive approach.

Passive is the default unless client instruction or a specific objective is required otherwise.  IFAs are required to take instruction from their clients.  So, if a client says they want a particular investment style, the IFA has to take that into account.

We see plenty of overly complex IFA-managed portfolios on this forum 

Are retail investors any better at constructing portfolio's? The longer a bull market runs. The greater the complancey expressed.  The greater the level of bashing of established and respected investment managers. Because they've failed to outperform the current fad that's sucking in cash and driving momentum. As soon as the words UK bias pop up. You can immediately gauge the lack of comprehension with regards to equity investing generally and index construction.  

DrSyn

Hoenir said:
The longer a bull market runs. The greater the complancey expressed. The greater the level of bashing of established and respected investment managers. 

Would you care to name say three of these established and respected investment managers who get bashed on this forum when a bull market runs.                                                                        

waveneygnome

0% passive/100% active

I posted this on another thread, but think its relevant here too:  my IFA has me in this lot:  I think they are all active:  is there any need for so many?  (I think I know the answer to this;  but I am meant to be trusting the advisor)

	Fund name	Percentage
1	Royal London Sustainable Leaders Trust C Acc	11.00
2	WS Gresham House UK Multi Cap Income C Acc	11.00
3	Invesco UK Opportunities (UK) Z Acc	11.00
4	Stewart Investors Indian Subcontinent Sustainability B Acc GBP	3.00
5	Jupiter India I Acc	3.00
6	Liontrust European Dynamic I Inc	4.50
7	BlackRock Continental European D Acc	4.50
8	Jupiter Asian Income I Acc	6.00
9	Invesco Pacific (UK) Z Acc	6.00
10	M&G Asian I Acc GBP	5.00
11	L&G Global Technology Index Trust I Acc	4.50
12	Schroder Global Sustainable Growth Z Acc	4.50
13	Fidelity Japan W Acc	2.50
14	JPM US Select C Acc	5.00
15	AXA Framlington American Growth Z Acc	5.00
16	Royal London US Growth Trust A Inc	2.50
17	Royal London Sustainable World Trust C Acc	4.00
18	BNY Mellon Multi-Asset Growth Inst W Acc	4.00
19	JGF-Jupiter Monthly Income Bond I Acc GBP	3.00

 

dunstonh

100% passive/0% active

 is there any need for so many?  (I think I know the answer to this;  but I am meant to be trusting the advisor)

19 funds is not that many.  A bit over typical but if a DFM MPS is being used then you would expect more funds due to fund house limits imposed.    

JohnWinder

 is there any need for so many?'

It does, by popular thinking, seem silly to have several funds with as little as 3% or 5% of your portfolio since any amazingly good, consistent out-performance of 1-2%/year will only improve your returns by a thirtieth of 1.5%/year which is why DIYers might not bother with all the complexity. But you've paid someone to choose 'better than market' funds for you, otherwise you'd just hold 'market matching' funds, so that someone wants some protection against your response to poor choices. 

I can see why an adviser might need that many, and the 24 you had a year ago. If one or two of your funds do poorly it will hardly impact your returns, protecting that someone's reputation; 'that's why we choose many funds for you'.  If many of your funds have a bad run together, that someone can say 'it's a widespread market problem, not to do with our choices'. And I suppose that thinking is all fairly valid, but you're paying at least an extra 0.5%/year more in fund management fees than a couple of trackers would cost. 

Were you and others like you to move in concert to trackers a lot of money over their lifetimes would end up in the hands of those investors rather than the financial services industry, because all the active investors can only get market returns less costs in aggregate. Forgoing that benefit you risk getting better than market returns (nice), or worse than market returns (opposite of nice).

Linton

The main reason against a private investor using say 20 funds would be  the effort required to manage them all eg rebalancing. For an advisory company this should not be a problem since management would presumably be automated.

I guess fund managers may not appreciate advisor companies dealing in quantities of say
£100M worth of units at a moment in time.  It could also be a risk if all a large advisor’s customers had all their money lodged with a very small number of managers. To take an extreme example SJP has 1M customers with an average of £160K each. All using the same small set of funds could be problematic.

dunstonh

100% passive/0% active

I guess fund managers may not appreciate advisor companies dealing in quantities of say
£100M worth of units at a moment in time. 

That is the reason. Some fund houses cap the amount they can invest in a fund, hence the need for additional funds.  Large movements in or out can damage the investment strategy of a fund.    

It does, by popular thinking, seem silly to have several funds with as little as 3% or 5% of your portfolio since any amazingly good, consistent out-performance of 1-2%/year will only improve your returns by a thirtieth of 1.5%/year which is why DIYers might not bother with all the complexity.

DIY portfolios are too small to have limits imposed on them.

I can see why an adviser might need that many, and the 24 you had a year ago. If one or two of your funds do poorly it will hardly impact your returns, protecting that someone's reputation; 'that's why we choose many funds for you'. 

Its not why they choose that many.

JohnWinder

I wonder if 'big fund movements damaging strategy' applies to index tracking funds. Not immediately obvious that it would.

Alexland

JohnWinder said:

I wonder if 'big fund movements damaging strategy' applies to index tracking funds. Not immediately obvious that it would.

Frequent big movement would affect any fund by driving up transaction fees. A passive manager would be just as much required to sell down a chunk of portfolio if a big redemption occurred or buy more assets if a big investment occurred. Their optimal sampling strategy might make this less painful and the effects might be less on a passive portfolio as the larger holdings would be in more liquid assets. An active manager might have a large position in something more niche with higher spread etc.

Hoenir

DrSyn said:

Hoenir said:
The longer a bull market runs. The greater the complancey expressed. The greater the level of bashing of established and respected investment managers. 

Would you care to name say three of these established and respected investment managers who get bashed on this forum when a bull market runs.                                                                        

Soon enough a thread crops up. Every generation of investor at some point believes they've found the Holy Grail.