Thanks JR - I checked those : Yacktman, Bruce, Templeton Global Bond Fund, FPA Crescent. they are all under performing the SP500 in the last 1,3 and 5 years by a lot. Some of them are luckier on a 10-year/15-year basis. Its all about *when* to start measuring the performance and if you include some bubbly years, some years when the non-US companies were growing more than the US and the stats can work in favor of some funds. However I do not see this as a proof that their managers really know what they are doing. If you take a 10 year period at any point in time, there will be some funds that will outperform the SP500 - but they won't be the same in the next year. Case in point Yacktman that seem a complete mess the last 5 years. I would really like to be able to compare apples to apples, if you know of such a screener ? - Funds that invest in US stocks, so they can be compared to the SP500 and that can consistently outperform the S&P500 by at least the amount of their fees.
I am convinced that some (a few) managers are better than others / most. In a period like we've seen over the last 6 years where the markets are regaining previous highs and going up to all-time highs on cheap money and QE, many mutual fund managers are likely to be trailing. The ones who are winning are mainly those who are 100% long / small-mid cap growth types - the same ones who drop 50% or more in a time like Q4 '07 through Q1 '09. Nobody beats the market every year, and everybody loses money once in a while. These funds are in the more conservative portion of my portfolio. The very best managers on earth are actually the managers who only take money from a limited number of very wealthy investors and who are able to spend huge amounts of money on technology, HFT systems, research, etc. And they're able shroud themselves in a much greater level of secrecy due to having far less regulations placed on them. Although many hedge funds aren't so great themselves, the very best hedge fund managers will always be ahead of the very best mutual fund managers, who are far more regulated and less flexible, and have less money to spend on various edges. https://en.wikipedia.org/wiki/Renaissance_Technologies https://en.wikipedia.org/wiki/D._E._Shaw_&_Co. https://en.wikipedia.org/wiki/Point72_Asset_Management
Thanks, I am sure there are some fund managers that are better than others (especially given the low barrier that they have set), just the numbers are certainly not telling that. If you take the 5-star rated funds from 10 years ago, only 14% of them are still top rated. In other words - if you invest right now in a glowing, 5-star fund and intend to hold for 10 years, you face a 86% chance that your fund will be underperforming. If you invest in a less stellar fund, your odds are even lower. IMO, you have a much better chance to either invest in a low cost index fund/ETF, or to spend the time and energy to research your own portfolio. As for the 'secret' managers - I am a high net worth investor myself, and have worked with some of the best managers. The ones that can give good returns do it at *very* high levels of risk and provide less transparency. And again, when their performance is not publicly tracked - they can claim any performance that suits them. I believe Bernie Maddoff was one of those investing gurus for high net worth individuals, no? If a money manager starts charing fees on his actual performance (by how much he outperforms the indexes), then I would trust he knows what he is doing. Since you have both long term funds and do your own investing - can you share your own performance vs those funds and do you think it was worth it. I am always open to find the ones that really know what they are doing - I understand that they can't beat the markets every year (although - thats their job - would someone hire you if you claim some years he would be better off without you on his staff, but some years you will actually work) yet if 5 years in a row they underperform the markets its not a signal they know what they are doing.
I've been investing for 21 years, managing other peoples' money for 11 years. Started at a bank, moved on to a big firm after about a year, then went off on my own about 6 years ago... I invest other peoples' money quite a bit more conservatively than my own. I'll just say that my clients these days are all accredited investors, and most of them are retired and fairly conservative - investing mostly for income and capital preservation with the majority of their millions. I have about a dozen clients total, with ~ $100 mil in assets total under management. I've averaged about 15% in my personal taxable accounts over the years, not without a fair amount of volatility. I lost over 25% of my money from Q4 '07 through Q1 '09. Long / short stocks, long puts and calls, selling covered calls; some shorter term higher yielding debt here and there; commodities via ETFs, etc. Pretty active and aggressive, and mainly concerned with capital appreciation here. May sometimes get more defensive. My retirement accounts are more conservative, and are about 20-25% of my money - mainly those mutual funds mentioned above, and also a bit of commodities exposure via ETFs. Have slightly outperformed the markets over the 20 or so years I've had various retirement accounts with previous jobs and as a small business owner: traditional / Roth IRA, 401k, SEP IRA, etc. In these accounts, I'm more concerned with not losing a whole lot when times get tough than with trying to make a huge amount of money every month and year. I like the idea of having a little of my money invested with reputable managers who have access to research, experience, theories and points of view, etc that differ from mine. I'm not one of those guys who believes I know it all or that I'm the smartest SOB on earth - I know better... which I suppose DOES make me smarter than most people. Simons, Shaw, and Cohen charge very high fees because of the high number of transactions and the large amounts of money spent on programming, technology, etc. I think all 3 are 5/50, whereas most hedge funds are 2/20. If you've never read "More Money Than God", or "The Quants", I'd recommend these books. These guys and others are featured in these books. One of the guys whose name escapes me in "The Quants" actually reviewed a friend's investment paperwork the friend had received from Bernie Madoff, who his friend had a small amount of money invested with back some 20+ years ago. The friend was considering investing most of his money with Madoff, since he was apparently doing so well. The first guy checked out the account statements, and saw that Madoff was supposedly making very heavy use of options. The first guy checked into the daily options activity that actually went on during that time, and realized that Madoff was not doing what he was claiming to do... The first guy told the second guy to take his money out of Madoff's fund ASAP, and he reported Madoff to the feds. He said he never heard anything about it again until he saw Madoff all over the news a dozen or so years later...
Simons: http://www.insidermonkey.com/hedge-fund/renaissance+technologies/5/ https://math.berkeley.edu/~berlek/pubs/bloomberg.pdf
