Actively managed funds tout their ability to successfully rotate across styles (such as large-caps versus small-caps and value versus growth) or sectors (industries) and thus outperform passive strategies (such as index funds). It is certainly true that investment styles do move in and out of favor, presenting actively managed funds with an opportunity for asset…
Investors choose mutual funds based on their investment objectives. In pursuit of said objectives, they can choose from among the broader asset classes (such as stocks and bonds) with additional, more specialized options available within each class. These decisions are important because they determine the amount of exposure an investor has to specific types of…
One of the more frequently asked questions I receive as the director of research for The BAM ALLIANCE is whether, as investors abandon active mutual funds, it will become easier for active managers to outperform. The trend toward passive investing has been inexorable, although slow, for the past 20 years, with roughly 1% of active…
Every time interest rates are low, investors begin to make mistakes. They tend to engage in activities that they otherwise wouldn’t undertake—such as stretching for yield by taking on credit risk—if rates were at more “normal” levels like 4% or 5%. With Treasury yields having been at extremely low levels for seven years now, and…
A recent article in The Wall Street Journal contained a headline that very likely frightened many investors — and in my opinion, that’s precisely what it was meant to do. Otherwise, why inform investors that “U.S. public pension plans and mutual funds are sheltering more of their holdings in cash than they have in years,…
As sure as the sun rises in the east, at the start of each year, you’ll hear from “gurus” appearing in the financial media that this year will be a stock picker’s year. And as sure as the sun sets in the west, when the year ends, you will hear various excuses for why it…
Leonard Kostovetsky and Jerold Warner, the authors of the study You’re Fired! New Evidence on Portfolio Manager Turnover and Performance, which was published in the August 2015 issue of the Journal of Financial and Quantitative Analysis, contribute to the literature on the performance of money managers by examining managerial turnover at both internally managed mutual…
From 1980 to 2014, the percentage of American households that owned mutual funds rose from 5.7 percent to 43.4 percent. At the beginning of 1980, mutual funds held only around 4 percent of all U.S. equity. However, that figure is now around 30 percent. That increased share is basically explained by the fact that direct…
