Odds are 99-1 according to the Pensions Institute

This article was originally published on Quadrant Group’s website. Quadrant Group was acquired by Progeny in March 2017.

Finding a fund manager that outperforms the market is one in a hundred according to a recent study by the Pensions Institute, the only UK academic research centre focused entirely on pension’s research based at City University London. The institute examined the monthly returns of 516 funds (unit trusts and Oeics) over a 10-year study focused on British shares and determined that a typical investor would be 1.4pc a year better off by switching to a low-cost passive UK equity tracker.

Professor David Blake, the director of the Pensions Institute, said: “Based on the findings, just 1pc of fund managers are ‘stars’ who are able to generate superior performance in excess of operating and trading costs. But they extract all of this for themselves via fees, leaving nothing for investors.”

Unless you are the sort of person who feels comfortable with odds of 99-1, which sounds to me about as certain as the long shot at Ascot Racecourse, you may want to think about passive investing.

Trying to pick one of the few winners is extremely difficult because the markets are actually efficient. Prices reflect public information about the fairest assessment of value at any particular point in time. If you have studied finance, you may be familiar with the Efficient Market Hypothesis which has been around since 1966. It is still very relevant today and holds that particularly after costs to make a return greater than the market without taking more risk than the market is almost impossible.

At the Quadrant Group, we have the firm conviction that passive investing is a more effective strategy and provides our clients with the best chance of a favourable outcome.

For a further article about the Pension Institute study read: ‘Just one fund manager in 100 beats the market’ published on 17 June 2014 by Telegraph journalist, Richard Evans.

Read The Telegraph Article

This article does not constitute financial advice. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult your financial planner to take into account your particular investment objectives, financial situation and individual needs. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections.

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and the value of investments can fall as well as rise. No representation is made that the stated results will be replicated.

Andrew Pereira

Director, Wealth

Andrew has been working with families, high-net-worth clients and business owners for well over 20 years.

Learn more about Andrew Pereira