Three Certainties in Life - Tax, Death and Fund Fees

Are you aware of the tremendous impact that fund fees (and fees for Private Banking or Independent Financial Advisers) have on the long-term performance of your Investments?

Should you trust Fund Ratings?

Fund rating firms could be misleading investors by improving the score they give funds in an effort to sell their badge of approval to investment managers. So do not rely blindly on these ratings.

Target Date Funds no Panacea for Retirement

Nobel Prize winner is no fan of Target Date Funds

The only way to hold Euro-denominated Bonds

Whatever you make of the latest measures taken by the ECB to 'boost the economies' of the Euro-zone do keep in mind one key rule for your financial survival: Do not hold any bonds denominated in Euros unless they are backed by the full-faith and credit of Germany. As the interest rate on many of those bonds is now turning negative it probably is advisable to give them a miss as well and stick to cash. At some stage some members of the Euro-zone may default or leave the Euro-zone and the value of their obligations will nose-dive. So buying Italian or French bonds just because they return a measly 1.5 percent is akin to picking up pennies in front of a steamroller. Index-hugging fund managers playing with other people's money in the big investment institutions will continue to play this game of Russian Roulette and you should make sure that you avoid them if they play this dangerous game.

S&P Studies on Investment Fund Performance

http://us.spindices.com/resource-center/thought-leadership/spiva/

http://www.spindices.com/resource-center/thought-leadership/research/

Picking the right Fund nearly as tricky as picking the right Stock

It might be even more difficult as there are more (mutual, hedge) funds as there are listed companies!
Regular Mutual Fund Outperformance Is Highly Rare (New York Times)

Do you really understand your funds?

Looking at some Investment Agreements that were leaked one has to wonder how many investors really are able - or willing - to understand the nitty gritty contained in these lengthy documents. As the agreements referred to in this link cover investments by professional investors in Private Equity Funds they are drawn up by expensive lawyers in order to be read by expensive lawyers. But even where professional investors are involved we doubt that their ultimate paymasters - the trustees in pension funds for example - really bother to read the agreements from end to end. So any private investor has to be extra careful before handing over his hard-earned money to any investment adviser, however nice the offices are, however impressive his or her credentials or the brochures and presentations that are offered.

10 things you should ask your financial adviser about
(MarketWatch)

Do not be taken in by fancy offices, glossy brochures or even by the centuries-old pedigree of an investment management company. If you are not sure how to protect your interests in the face of a slick and professional marketing machine you should consider taking impartial advice. And do not even think to rely on regulators - just never forget Cyprus and the fact that EU regulators were powerless (unwilling?) to help depositors in some of the country's banks.

A significant cause of damage for investors

Says article (Financial Times, 18 March 2013) that deals with another mysterious and opaque way that providers of investment services can use to fatten their profit at the expense of their 'clients'. How many investors will know the difference between 'creation' and 'cancellation' prices for their investment funds? But technicalities such as these can make quite a difference and sharp practices should be banned. In the absence of legislation investors are well advised to consult experts that can help them safeguard their hard-earned cash.

How reliable are Fund Ratings?

When rating analysts at Morningstar give the thumbs up to nearly two-thirds of the funds they review it appears that their firm may be "less fund watchdog, and more fund lap dog." (MarketWatch Annual Lump of Coal Awards). Off-the-Shelf ratings are no substitute for independent advice and evidence that is based on actual investment performance without undue emphasis on 'subjective' judgements.

Fund and Adviser Selection - Do not delude yourself

"An actively managed portfolio consisting of five funds held for 20 years had only a 2 percent chance of beating a comparable portfolio of index funds" says a new study by Richard Ferri (Forbes)

Watch the money-weighted rates of return on funds

Most investors find it difficult enough to understand the performance data they are given by providers of investment funds. Few, however, will realise that these numbers can be quite distorted as they usually are not calculated on a money-weighted basis. This difference, while small on an annual basis, can add up to quite a substantial amount if the investor holds the fund for a number of years. The cumulative loss can reach 60 per cent over 15 years as has been reported in a new book by investment fund pioneer John Bogle.

Target-date funds no panacea for retirement saving

Are they just a marketing gimmick? (Reuters)

Azentus Fund loses 6.70 % in first year

But assets under management are up. Need we say more? Nothing illustrates the need for careful fund selection more - and this applies to all investment funds, traditional, hedge or private equity.

Pitfalls of Performance-based Money Management Fees

Interesting article about a seemingly fair performance fee. Investors are advised to check the small print though!

Fund investors given short shrift by US Supreme Court

A recent judgement by the US Supreme Court relies on hair-splitting as it declares that the management company of a mutual fund cannot be sued by investors that are misled by a prospectus that is issued by a managed by the company. As a consequence investors cannot get any compensation from the people that are actually behind the misleading information. While this case is a purely US case it is representative for the cavalier attitude that investors are treated by regulators, courts and governments in most jurisdictions.

Does your adviser take secret commission payments?

One of the leading platforms for investment fund sales in the UK refuses to disclose commission payments to funds it sells through its platform (Daily Mail)

Hedge Fund-lite UCITS Fund Warning

The bureaucrats trying to protect the investing public from costly failures in the fund management industry may have good intentions but the outcome of their deliberations more often than not adds additional complexity to the rules governing the investment industry. When seasoned industry figures warn of potential blow-ups of certain types of UCITS-III complaint 'hedge fund-lite' vehicles the investment public - whether it is ordinary investors or 'sophisticated' investors - should wake up to the fact that it would do well to consult unbiased advisers before committing their funds to any investment product.

Investment Fund Performance - More than meets the Eye

If you thought that the problem of selecting the right investment fund from among the thousands on offer should not be all that difficult you may well have a look at this article. The investment management industry may find it profitable to segment its product offerings into more and more specialised offerings but that makes it more and more difficult for the investor to find the right fund. There are more investment funds out there than there are publicly listed shares and when one adds all the 'structured' investment products the list only gets longer.

UCITS IV - is your money now really safe?

The regulatory machine is (as always) running overtime but the outcome is not always proportional to the effort. After UCITS I, II and III regulators are already putting the finishing touches on the next (but surely not last) version of the framework for investment funds in Europe. When a commentator writes that 'EU laws impose no ficuiary duties on boards of directors and the definition of their role is again left at the discretion of country regulators' (Samuel Sender, FTfm, 28 March 2011) one can have but little confidence in the outcome of the deliberations of the regulators.