• Stuart Fowler

Star fund managers in the doghouse – again

It’s time for the latest annual lambasting of dog funds by fund broker Bestinvest. Don’t you just love the irony of this? Or are you a gullible victim?

Each year Bestinvest post a list of active fund managers who have significantly underperformed their benchmark over the last three years: the so-called ‘dog funds’. The list often includes past ‘star’ fund managers. The latest list of dogs apparently includes a notably large number of past stars. There is nothing odd about this. No Monkey Business readers (search the site for ‘active management’ or ‘performance’) will know the evidence that beating the market by enough to make up the Cost Wedge requires big bets. Big bets mean big periods of underperformance. It is only with hindsight that you know whether a current dog is a star going through a bad patch (and ‘sticking to his last’) or really a dog. It is a sad proof of investors’ gullibility that Bestinvest can rub their noses in it with an annual survey that makes the same point, safe in the knowledge that few people willl draw the right conclusions. Broking actively-managed funds may well be a good business but investing in them piles up problems of regret (and reselection effort) and destroys long-run wealth outcomes through wasted costs.

#activemanagement #costs


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