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Financial Happenings Blog
Thursday, February 11 2010

Scott Francis in his latest Eureka Report article shines the light on the performance of well known and used active fund managers.  Scott reports that not one of the managers in the sample were able to beat the ASX300 index return for 2009.  He suggests that part of the answer is that managed funds have a number of structural disadvantages that work against them. These include:

  • The need to hold some cash for investor redemptions.
  • The hidden (market impact) costs of trading.
  • The money flow of investor trading.

Scott concludes that not finding one managed fund to beat the average market return in a year is surprising. It certainly brings into question the role of active managed funds in portfolios, especially in comparison with the many low-cost index and ETF products that offer access to different sectors and markets.

Ultimately, investors have to decide whether the structural headwinds of a managed fund such as market impact costs, cash holdings and high fees make them an efficient way to access investment markets - especially when their performance fails even the most basic hurdles.

Please click on the following link to be taken to the article -
Australia's biggest losers.

Posted by: AT 04:52 am   |  Permalink   |  Email
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