Vanguard reveals underachieving balanced managers
Three out of four balanced fund managers underperform after fees and taxes are taken into account, a new survey from specialist index managerVanguard Investmentshas found.
“A balanced fund should be the showcase for its manager, capturing their skills in a superior bottom line,” Vanguard Investments Australia managing director Jeremy Duffield says.
“All too often this is not the case — managers miss their markers with higher risk, lower returns or a combination of both.”
Vanguard, which first carried out the survey in 1997, used the data for the 5 years to 31 December 2001 to analyse four elements of after tax, after fee delivered results for 28 managers who manage pooled superannuation trusts.
“Notwithstanding changes in markets and changes in managers [since 1997], our conclusions are the same. Our findings show that few balanced fund managers have outperformed their benchmarks,” Duffield says.
Influencing the outcome of this survey has been the good performance of Australian equities, lifting many managers results above the market, Duffield says.
However, without these results, it has been determined that only three managers outpeformed at less than 0.2 per cent per annum. Further, 22 out of the 28 managers underperformed by more than 0.5 per cent.
“Australian shares have performed well and if taken out of the performance, the results would have been worse. This leads to greater scepticism about the results,” Duffield says.
Vanguard has increased its retail market exposure earlier this year with the launch of the Vanguard Personal Superannuation Plan, enabling planners who use active fund managers to put a percentage of the portfolio in indexing.
Vanguard Investments Australia assets have grown from $200 million in 1999 to currently $1.5 billion in assets, with most of this invested in fixed interest.
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