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REUTERS Siemens Said to Withdraw Deposits From SocGen | Siemens has withdrawn money from Société Général — but because of fund underperformance, not fears over the French bank's health, according to Reuters.
An active manager will always think that there are too many index funds, but an investor who has suffered nine years of hedge fund underperformance may feel differently.
Besides adding up to 100%, it's a pattern of active fund underperformance versus indexes that consistently occurs in the mutual fund marketplace.
The current hedge fund underperformance coupled with the steepest industry-wide fees of 2%and20%0% and additional hidden costs that can be charged to fund investors make investors more likely to ask questions.
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So for all the opportunistic trading success, it was a failure to trade that led to the fund's underperformance in late November and December.
However, the biggest reason for the fund's underperformance was the fundamental overlay that management puts on the stock selection.
Your long-term record is stellar, but what explains the fund's underperformance over the three- and five-year periods.
An analysis of Third Avenue's global and international funds also demonstrated underperformance.
"Thus, from the perspective of the mutual fund company, the relative underperformance of young managers in the postbubble period turns out not to be that costly," they report.
After a long period of underperformance, the fund management group may decide to switch styles to chase the new trend; Sod's Law may ensure such switches occur just as the trend is about to change back.Don't get me wrong.
The price you pay for a diversified, actively managed mutual fund usually results in underperformance due to high fees, even if you invest in a no-load fund.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com