12 October 2020

Never forget to check the fees on Active Equity Funds

Stable returns, but high costs. This headline caught our attention in today's edition of a German newspaper featuring a large Fidelity Fund focusing on German Equties. So when we checked Morningstar it said that the ongoing charge was a whopping 1.92% PER ANNUM

When you consider that this means that total fees accruing to Fidelity on this fund is around €20 Million (given the total fund size of just over 1000 Million) one is left with the question: is this amount really justified when at most 2 fund managers and a few analysts are needed to run this fund? Pay them a generous €300000 each and allow some ancillary expenses and one would have to assume that fees of 3-4 Million would be more than enough.

Delicate detail: as this fee does not explicitly state it is the TER - Total Expense Ratio - it could well be that the unlucky investor is hit with more fees.

And on top of that many - if not most investors - are charged on average an additional 1% by the Asset Manager or Private Banker that allocates their savings to that fund.

So does the performance justify investment in such an 'active' fund? Yes and No, not if you compare performance sinc 1990, yes if you just look at the past 10 years.

Does the performance justify high fees? As always, it depends. So speak to an independent analyst or consultant who has no financial interest in your decision and be aware that high charges are a serious drag on performance.

27 September 2020

Given interest rates are near zero - should you pay for an 'Active Manager'?

Given that most Private Client Fund Managers charge fees of at least one percent and that the funds that many put their client's money in charge another 1.5 percent on average (if you are lucky) the total cost of fund management will be at least in the region of 2.5 percent PER ANNUM!
And you have no guarantee that you will have a positive performance, the costs are incurred whichever result your fund manager produces. Nice work if you can get it!
Investing in Bonds used to be recommended in most balanced portfolios but given the low rates and risk of capital losses once interest rates rise again it might be better to park a good portion of your portfolio in cash - even if it gives you no return.
But at least you do not pay any fees on that part of your money, and have no risk of loss. But do not leave it with your fund manager(s) as they will charge a management fee even if money is just parked in cash as well.
So at the very least investors should try to find a truly independent Private Banking Advisory to avoid the most costly options.

11 August 2020

Be wary of SPARCs and Blank Cheque Companies

This latest investment fad is calculated to capitalise on the public's desperate search for yield and will primarily suit the promoters. So look out for any of these 'investments' that appear in your portfolio and question the financial adviser or private banker who selected them for the reasoning behind their decision.

The Spac race: Wall St banks jostle to get in on hot new trend

7 August 2020

Another Ponzi Schemes- 'only' $400 Mio go missing

Never invest on the word of a good friend or well-regarded person (in politics, media, business) without getting a second opinion from an independent professional who has no stake in the proposal - be it a fee or being involved in the investment in any form or shape.

San Diego Magnate Masterminded $400 Million Liquor License Scam

and another Scam, this one 'only' for $18.5 Million:

 Private Investigator Tech Startup Charged in $18.5 Million Fraud

this one is 'only' for $25 Million:

Cryptocurrency Firm Co-Founder Pleads Guilty to Coin Offering Fraud  

and another $60 Million changed hands:

Investment Adviser CIO Charged with Running Ponzi-Like Scheme

24 July 2020

60/40 Balanced Portfolio in times of Zero Interest Rates

The advocates of the 60/40 balanced portfolio forget that the 40% that is invested in bonds poses a great risk for no return. Given where bond yields (if you want to call the puny returns on offer a 'yield') are the only way that bond prices will ever move to a significant extent is DOWN. That would mean losses on the bond portion of the portfolio. Much better to stay in cash (or pull out the money from the bank if ever the governments impose negative interest rates).
Vanguard defends 60/40 Portfolio

27 March 2020

Another slap on the wrist of UBS

UBS Fined $8.2 Million by Singapore for Misconduct by Advisers