For a quick recap, active funds are run by managers who consistently buy and sell shares, bonds or listed property (A-REITs), in an attempt to outperform their sector index.
The ongoing cost of buying and selling adds up, and this results in extra fees to be paid by you.
And if you’re paying those fees to an Australian general active retail fund, there’s a 72% chance that your fund failed to outperform the ASX 200 Accumulation Index last year.
If you were invested in an international general active fund last year, there’s a 90% chance your fund failed to outperform the MSCI World Accumulation international index.
In listed property or A-REITs, there’s an 86% chance your fund failed to outperform the ASX 200 A-REIT index.
Finally, were you invested in an active retail fixed interest or bond fund?
Well, there’s a 100% certainty your fund failed to outperform the ASX Australian Fixed Interest Index last year because not one could beat the index.
Not that any of this should be a surprise; these results are consistent with the long term results of active funds against their respective sector indices.
And for the investor, even if they are in a fund that outperforms the index on a given year, there’s no guarantee this performance will continue.
Across a longer timeframe a fund’s ability to outperform the index consistently drops considerably.
Funds outperform and then they’ll inevitably underperform the next year, so chasing winners becomes a futile exercise.
From an investor’s point of view, the data continues to suggest investing in actively managed funds costs more and regularly provides lower returns.
If you’re invested in actively managed funds you need to start asking yourself why.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. Need help with your financial your financial future, we think we’re the best financial adviser in Australia.
