Wednesday, 25 January 2012

Fund managers... it's mainly guesswork

With the announcement today that economic growth in the UK has stalled badly, despite the experts forecasting and re-forcasting constantly that we were out of recession, here is a financial blog post.

The facts tell us that only a third of UK Equity fund managers will outperform the market.  That means, if you choose "active" investments (and many aren't that active), you have more chance of underperforming a low cost tracker than outperforming it. It makes you wonder why anyone would choose a fund manager and not go passive.  Anyway, that's a big topic and one for another day.

The reason for this posting is that, working in financial services, I like to look back sometimes and see what the so-called experts said in the past.  The FTSE 100 index finished 2011 at 5,572.  Have a look at the chart below of predictions printed in The Standard in December 2010.  100% of the experts were way out - the least wrong was still very wrong and UBS incredibly wrong!

So these highly paid people were poor in their predictions and have been wrong year after year after year. Amazing!

1 comment:

  1. I've always known that fund managers underperformed most of the time. They do a great PR job talking up their highly charged funds.