Fund managers are damned if they do and damned if they don’t…
Wednesday, 11 March 2009
An active fund manager, whose responsibility is to manage investors’ assets on the basis of out performing the market, needs to buy and sell underlying investments to achieve this objective, yet when they do so, the costs of trading impact on long term returns. New evidence shows that “The average annual turn-over for UK unit trusts and open-ended funds jumped to 90 per cent in the year to February 2009 from 50 per cent in the preceding 12 months. A year earlier, the figure was just 30 per cent, according to data collated by Financial Express” according to the FT.
Such active trading could be prompted by our current crisis..in fact the FT article quotes Richard Ramyar, head of research for the UK and Ireland at Lipper. He says “It’s too easy to beat fund managers around the head with this, but they are being squeezed by the markets. If they tried to hold onto the falling knives, we would blame them for that. In other words, sitting tight and watching your portfolio collapse in value would not have won prizes last year.”
Unfortunately actively managing investments has still in many cases seen falls in valuations of many funds.
Fund managers appear to have no where to run or hide for that matter. They trade in an attempt to reduce losses on portfolios but trading can exacerbate the losses. Of course, the opposite can be true, if the trading works and losses can be reduced.
Unfortunately the evidence shows not too many funds succeed in making positive returns in a falling market.
The point is that over time, trading costs matter.
posted by Murray Round Wealth Management @ 14:38,
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.
Welcome to our Blog
Our Blog focuses on the three Ts...truth, transparency and trust. The world of investment management is fraught with self interested parties keen to sell investment products but wrapped up as 'advice'. Only with totally transparency, can investors make informed and successful decisions. We have included various categories for simpler navigation, alternatively search our Blog using key words you think are relevant. We hope you find something of interest to you.
Contact Us
We welcome your enquiry to us. Simply click on Contact Us' link at the top of the page. You may also email us at service@murrayround.co.uk or telephone 01743 248108.
Visit us again!
