Another Bad Year For Active Managers

From the Financial Times (11/11/2014): “Fewer fund managers are beating the market this year than at any time in over a decade, piling further misery on a profession that faces increasing investor scepticism.” Among actively-managed U.S. large-cap equity funds, “Only 17.7 per cent are beating the Russell 1000 index of large-cap stocks so far this year. That compares with 40.5 per cent for 2013 as a whole.” Since 2003, “there has only been one year–2007–when a majority of active managers beat the market.” Every year, of course, there’s some convincing new reason why the “irrational”market once again stumped the managers. […]

Where are the Customers’ Yachts?

Two recent articles on “top financial advisors” have left me slack-jawed with disgust. The first was in my local daily paper, the Naples Daily News (that’s Naples, Florida rather than Napoli, Italia!): “Thomas Moran, managing director of investments and a founding member of the Moran Edwards Asset Management Group of Wells Fargo Advisors in Naples, has been named by Barron’s as the top adviser in Southwest Florida.” Hey, congrats to Mr. Moran!  And what criteria were used to identify him as “the top adviser”? “Factors taken into account include assets under management, revenue produced for the firm and regulatory record, […]

Where’s the Value Added?

In my blog, “Costs Matter!” I show how dramatically higher fees will compound over time to reduce investors’ cumulative wealth. But costs are only one side of the investment coin, the other side of which is returns. Frankly, I don’t care if Fund A costs me more than Fund B, if my net returns from Fund A are higher than those from Fund B. So what we need to understand is whether the financial services industry succeeds in delivering  better-than-market returns net of the fees and expenses investors incur. That’s the industry’s value proposition: pay us to manage your money […]