Lies, Damn lies and statistics!
Monday 10 March 2008
This headline is an advertisement from Threadneedle in one of the national newspapers on Saturday 8th March.
I have no wish to challenge their claim, but I am interested in how they have beaten the market?
If I know how, then I could have faith in investing money in their funds. I want to know what were the decisions that the fund managers made which led to outperformance? It is no use to me or investors for these fund managers to claim they have outperformed as that is history, and quite frankly 5 years is only a short term time frame…I want to be reassured that what they are doing is repeatable.
The key issue is find out is 'how they captured alpha?'…(alpha is an investment term which is described as the part of the return that has not been generated by the market itself). If you as an investor cannot really be clear about how the fund manager has captured investment returns through skilful purchases and sales..ie alpha, how can you confidently invest for the future?
If you cannot understand how they have outperformed, how do you know they have outperformed?....just because they tell you they have! Remember investment companies are very good at marketing.
As an investor you need to carry out your own due diligence to find out whether the claims have substance or they are very good at marketing!
posted by Murray Round Wealth Management @ 13:45,
How successful is your money manager?
Friday 7 March 2008
One of the biggest problems for investors is to understand how successful their investment managers are with their money.
We have a download available of the full article….click here
Background to the problem
There is increasing evidence that institutional pension fund managers’ fees are rising not falling. This is partly due to the increase in hedge funds and private equity of the fund management groups. In the retail market, there is a growth of multimanager funds, which have much higher margins paid for by investors. Higher fees means there is less chance of getting any outperformance.
Unfortunately, there is no clear regulation to limit fees other than competition. At present, retail fund managers have a strong interest in keeping margins high. Whilst these fund managers are entitled to their profits if they perform, the question is… are they actually performing? Are investors really getting their moneys worth?
Murray Round has carried out research to help investors know what questions to ask their fund managers, stockbrokers or IFAs.
Summary findings
- Performance statistics issued by fund managers does not measure success.
- Fund managers, stockbrokers and IFAs can do more to provide measurable performance data.
- It is up to investors to request this data as it will not be provided automatically.
- Murray Round is able to provide independent interpretation where appropriate.
Categories: Articles, Active Funds, Fees, Wealth Management
posted by Murray Round Wealth Management @ 22:55,
Recessions don’t come with big signals
Wednesday 5 March 2008
“Warren Buffett, the billionaire ‘sage of Omaha’ runs the hugely successful Berkshire Hathaway global conglomerate, and is, if his riches are anything to go by, usually right about these things.
Recessions don’t come with big signals – in luckier times we’ve been through one before anyone other than the economic anoraks have noticed.
On the other hand, it’s not necessary to wait for the official definition – two successive quarters of shrinking – to call it. If you feel it, as many who are caught up in the US mortgage meltdown do, then you’re in it.
But if a slump is more about attitudes and perceptions, then you won’t be pleased to learn that the world’s most famous investor and the world’s third richest man has pronounced that "indeed the US is already in a recession and it will be long and deep.” says SkyNews
If you read and believe these comments, it may be your job not your money you need to be concerned about!
If companies contract, unemployment may rise. The city of London is already bracing itself for job losses. Yet, the good advice is to do what Buffett is doing…buying for the long term. He is not selling. In fact, he may be looking for opportunities as others bail out of the markets. These are times to keep your wits about you when others may be losing theirs!
Categories: Behavioural Finance
posted by Murray Round Wealth Management @ 11:37,
Hedge Fund Implodes
Tuesday 4 March 2008
"One of London's most successful hedge funds imploded yesterday"…. says the FT Friday 29 February
I am fascinated by the news of this and other failures, yet there is an appetite from investors to keep investing into hedge funds. We have mentioned in a previous post ...click here...the FSA were thinking of opening up hedge funds to retail investors…so why do investors remain invested or even consider investing into hedge funds?
Well if you know the risks and can afford to lose your capital, and you do, you cannot complain. Yet I wonder if investors actually do understand the risks they are taking?
I have said in the past, if you can find a manager who can consistently outperform the market average, then you will make money. This is because over time the market tends to slant upwards...(but not on a consistent basis). However, are these managers freely available to most investors?
If your wealth is say up to £25m, then are you really going to find a fund manager that works for you and beats the market? Any manager worth his/her salt, will be employed by the ultra high net worth investors…or large institutional funds…so for most of us, its better to remember to diversify your holdings, keep asset allocation as your strategy, keep turnover low to avoid costs…and capture as much of the market return that is possible. Perhaps then you will then have a successful investment experience over time.
But if you do find that superstar manager, let me know, I might have some more money for them to manage!
Categories: Hedge Funds, Asset Class Management, Diversification
posted by Murray Round Wealth Management @ 00:40,
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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