Three Degrees

  1. Index funds do not care if you make money. All they care about is that they get more assets when the market goes up.
  2. Large actively managed funds, benchmarked to an index, don’t really care if you make money… all they care about is that you make more money than if you had invested in an index fund – after fees of course.
  3. Index agnostic funds care a lot if you make money. Because if you make money, they make money. Everyone’s interests are aligned! People give up good jobs to have this optionality.

Yes, the system rewards fundraising over performance but should it?
As the result season for a number of quoted fund management groups is upon us, look at what the headlines focus on – flows and profits. As investors in their products, where do you think you rank – first or second?
A reminder of the FCA’s definition of ‘Value for Money’ – ‘Risk-adjusted returns net of fees’
Cheapness isn’t necessarily your friend, neither is scale.
With acknowledgement to Jared Dillan aka The Tenth Man

Back to Blogs and News