Monday, March 21, 2016

Fund management fact of the day

More confirmation of the case against stock-picking from a global S&P Dow Jones study which analyzed the after-fee performance of 25000 active funds and,
... found that 100 per cent of actively managed equity funds sold in the Netherlands have failed to beat their benchmark over the past five years. Ninety-five per cent of funds sold in Switzerland and 88 per cent of those on offer in Denmark also underperformed... Overall in Europe, four out of five active equity funds failed to beat their benchmark over the past five years, rising to 86 per cent over the past decade... Within that sample, 98.9 per cent of US equity funds underperformed over the past 10 years, 97 per cent of emerging market funds and 97.8 per cent of global equity funds... On a one-year basis it is still possible to outperform, but it is very difficult on a consistent basis over the long run.
The overwhelming lesson for long-term retail investors in equity markets is to choose the low-cost index-tracking funds which have grown six-fold over the past decade to $2.9 trillion,
The average equity fund manager is unable to deliver outperformance from stock selection or market timing. This means a typical investor would be almost 1.44 per cent better off per annum by switching to a UK equity tracker. A small group of star fund managers are able to generate superior performance, but they extract the whole of this outperformance for themselves via fees, leaving nothing for investors. All but the most sophisticated investors should invest in index funds.

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