Do you really think your fund manager is worth his salt?
Saturday 3 November 2007
Sometimes when I am reading papers I come across little snippets that are possibly more profound than the writer might have given credit. In a recent article by Pauline Skypala of the FT entitled Innovation can be rather hard to sell, it was the last paragraph that caught my eye…it pays sometimes to read all of the article than skipping…
“In an ideal world, the alpha and beta providers would be clearly separate and complementary. In the real world, it is hard to distinguish the consistent alpha producers, and even harder to put money with them. One investment banker claims in the Create/KPMG report that "2 per cent of people create 98 per cent of the value". That is perhaps not far off the truth. Why pay a high price for something that may not deliver, if you can get market returns at low cost? Tactical asset allocation may be the only skill worth paying for.” You can link to the full article here.
What is my point?
Tactical asset allocation works. Our job as fee only advisers is to apply tactical asset allocation principles with investment vehicles that deliver over time. There is ample evidence that over time, a passive approach makes sense. Yet because it is difficult to distinguish between what is alpha and beta, a chink of light opens for the active fund managers to sell their funds. They are very successful in doing so….why? Because it’s more profitable and for the fund manager, it keeps them in a job! Would you promote a system that makes you redundant…Of course, not!
Instead, if they will not make themselves redundant, you may need to sack them! Keep reading our blog and perhaps our scepticism of may fund managers is well founded and an alternative strategy is open to all.
Categories: Active funds, collectives
posted by Murray Round Wealth Management @ 15:40,
The Authors
Nicholas Round
Nic is the Managing Director of Murray Round Wealth Management Limited, who seeks to ensure the advice provided is truly independent. Based in Shropshire with clients local, national and worldwide, Nic has strived to find the best possible service for his clients needs, by researching and studying the market, trends and philosophies. Nic strongly believes Asset Class Management will bring his clients Financial Freedom, Independence and Happiness.
Kirsty
Kirsty is our communication guru. Managing information requires considerable due diligence and her passion for organisation gives the clarity we all seek. From Shropshire, with a Psychology Degree and much travelling, she is now back in Shrewsbury...and London often, keeping us all at Murray Round focused.
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