Passive or Active Fund choice

dunstonh

To give you the data, I will use L&G index tracker which is one of the best trackers to use in it's sector for tracking the general index (i.e. not focused on small, mid or large caps).
Discrete perf:
YTD: 192 / 375
2007: 130 / 353
2006: 159 / 320
2005: 125 / 293
2004: 130 / 275 .
Cumulative over 5 years: L&G 84.4% sector average: 85.9%

As I said, consistently around the mid table point. So, you have roughly half the managed funds beating the index and half failing to.

Its too simplistic to say trackers are best. In some places they are and in some places they are not.

There seems to be 1 for 100% active fund, 1 for 100 passive fund, dunstonh what are your thoughts on this?

Not exactly great choice is it

The only mention of risk levels in the document we've been provided with is out of 10 for each fund, active being 7 / 10 and passive 6 / 10...

This would generally mean a greater exposure to more volatile investment areas. However, that would typically mean greater potential. I wouldnt be surprised to see a greater Far east exposure but I havent looked it up so dont know.

[Deleted User]

dunstonh wrote: »

To give you the data, I will use L&G index tracker which is one of the best trackers to use in it's sector for tracking the general index

This is the same as my passive fund right? So you're for this fund?

arabianights

dunstonh wrote: »

To give you the data, I will use L&G index tracker which is one of the best trackers to use in it's sector for tracking the general index (i.e. not focused on small, mid or large caps).
Discrete perf:
YTD: 192 / 375
2007: 130 / 353
2006: 159 / 320
2005: 125 / 293
2004: 130 / 275 .
Cumulative over 5 years: L&G 84.4% sector average: 85.9%

As I said, consistently around the mid table point. So, you have roughly half the managed funds beating the index and half failing to.

You don't get it, do you?

In any given year of course the index will do just a bit better than midway. That's to be expected because the index is the average of the market without transaction costs.

But over five years... 84.4% is an annualised return of a wee bit over 13% - which again according to that morningstar page would easily put it in the top 10%.

dunstonh

You don't get it, do you?

Not me. You.

In any given year of course the index will do just a bit better than midway. That's to be expected because the index is the average of the market without transaction costs.

The index tracker is virtually matching the mid point.

But over five years... 84.4% is an annualised return of a wee bit over 13% - which again according to that morningstar page would easily put it in the top 10%.

How can that fund be in the top 10% when its mid table consistently?

Checking the global equity sector, the L&G funds (of which there are several) either match sector average or are below.

arabianights

dunstonh wrote: »

How can that fund be in the top 10% when its mid table consistently?

Oh for god's sake.

Essentially because of higher transaction costs. Otherwise it would be half way... except you wouldn't be able to tell which funds would be in the top half and which would be in the bottom half!

Actually take a look at this: http://www.stanford.edu/~wfsharpe/art/active/active.htm

[Deleted User]

dunstonh - can I grab your thoughts on post #13 ?

dunstonh

Oh for god's sake.

Still doesnt change the fact that the funds are coming out mid table meaning half the funds are above and half are below and its not in the 10%.

Actually take a look at this: http://www.stanford.edu/~wfsharpe/art/active/active.htm

It doesnt matter what it does before charges. Its the bottom line/end result that counts. Give me 10% after 1.5% charges over 8% after 0.3% charges any day.

You have assumed (and me through following your comments) that the fund in question is a tracker. We dont know that at this stage as david has mentioned it is a passive managed fund. Not a tracker fund. Passive funds dont have to track the index but may have a set asset/sector allocation with trades either bought and held or bought and sold by computer to retain allocation.

dunstonh - can I grab your thoughts on post #13 ?

Its not the same fund but the principle is the same. If its a global passive managed fund then I would go active. If it a global tracker fund then I would look at the sector/asset allocation of the managed and compare where the differences are and see which offers the better potential. If in doubt then doing 50/50 with each is probably as good as any. We are basically comparing Granny Smiths with Golden delicous and trying to work out which one is most like an apple.

Institutional funds often do not publish their data so you wont find this fund on trustnet or other similar so you cannot see where it comes out on risk/reward compared to other funds.

purch

Classic example of the uselessness of active funds

I think using research from the U.S.A. blurrs the argument somewhat....

The taxation of Mutual Funds, and especially the capital gains made within Active Managed Mutual Funds makes the argument for passive managed Tracking Funds much stronger from a U.S. viewpoint than from a U.K viewpoint.

However there are plenty of good cases to be made for Passive over Active funds


Plus, picking an argument with dunstonh :cool: is a guaranteed lose lose in most cases :eek:

arabianights

purch wrote: »

Plus, picking an argument with dunstonh :cool: is a guaranteed lose lose in most cases :eek:

It's quite hard to argue with someone with such a limited grasp of statistics, sure...

OP: strongly recommend you do your own research into how effective active managers are.

dunstonh

arabianights wrote: »

It's quite hard to argue with someone with such a limited grasp of statistics, sure...

OP: strongly recommend you do your own research into how effective active managers are.

I cannot understand how you make a consistent 4th-6th percentile fund appear in the top percentile of it's sector. If that means I have a limited grasp of stats then so be it.

Rather than be rude about it, why not explain how you magic the fund up the tables as I am sure I am not the only who would be interested in that?