Active Vs Passive Investing in South Africa

HavocXphere

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#41
10/10 for persistence and vigorous salesmanship. Still can't polish a turd though.

Unless you have a reliable way of pick future winning funds I'm not interested. And no the miles of excel sheets on past performance is not persuasive evidence in this regard no matter how many ways you try to slice it.
 
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#42
Haven't read the mounds of posts by this salesperson who claims to represent the entire financial industry, but is he claiming that historically, greater value is derived overall by managed funds over the equity index?
 

FxJalarupa

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#43
Specific Managed Funds...

Multi-Asset Flexible Funds with Worldwide Mandates...

And yes my data supports an overwhelming outperformance relative to equity indices... The rationale for my preference is also present...

Not a Salesperson... just a trader who is active in both is Share and ETF portfolio's and someone who does not buy into the hoopla of ETF's being a valuable alternative because of their low fees... I believe Active Management is alive and well in South Africa... ETF's will be crushed in a world of volatility... Its easy to pick a winner in a one way bet...
 

Hendrix

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#45
Specific Managed Funds...

Multi-Asset Flexible Funds with Worldwide Mandates...

And yes my data supports an overwhelming outperformance relative to equity indices... The rationale for my preference is also present...

Not a Salesperson... just a trader who is active in both is Share and ETF portfolio's and someone who does not buy into the hoopla of ETF's being a valuable alternative because of their low fees... I believe Active Management is alive and well in South Africa... ETF's will be crushed in a world of volatility... Its easy to pick a winner in a one way bet...
I agree, active management has its place, but one cannot compare multi asset funds to ETF's, as they are not the same. Compare apples with apples.
 

Hamster

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#46

Hendrix

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#47
I wouldn't say trying to convince, just keep the debate going...
I don't believe either is the number one, both have their place, I guess that's what I'm trying to get across. I sense that Mr FX is trying to pass on knowledge that we can all learn a bit from, he is passionate about his view, and so are others.
 

FxJalarupa

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#48
Read the below article, once again, over periods longer than a year, over 80% of funds cannot beat the index

http://www.moneyweb.co.za/investing/have-active-managers-lost-the-debate/
Source: Capital Group, based on Morningstar data. Based on monthly rolling periods from January 1996 to December 2015. U.S. domestic funds in the Select Active group are those in the Morningstar Large Value, Large Blend and Large Growth categories. US index is S&P 500. The index is unmanaged and, therefore, has no expenses. Investors cannot invest directly in an index. Past results are not predictive of future results.

Show me a local study please... you guys talking about the S&P500 I want to see the ALSI... c'mon... pony up
 

Hendrix

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#50
If 51% beat the index, you'd have a very good case, but they don't, hence the ETF is the "safer" choice. As finding that winning fund is a gamble.
 
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#51
If 51% beat the index, you'd have a very good case, but they don't, hence the ETF is the "safer" choice. As finding that winning fund is a gamble.
He's applying a strong confirmation bias in his interpretation of value.

Something that cost many an algorithmic trader the shirt on his back in its early days.

Value is not a quantified and standardised metric for performance forecasting, and is a tool used by financial salespeople to obfuscate an easy-win from the pockets of those who would in all likelihood be prime candidates for a Stanley Milgram experiment.

I cannot support the claim made by the OP, and in my years of trading and investing, have not ever discovered a universal truth for performance forecasting to such a nuanced degree as claimed by the OP. The only time this exists is in arbitrage or correlated assets (and even then there is nuance beyond universal truth). The stats don't appear to support it either...
 

FxJalarupa

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#53


ALSI in Dollars... Source Bloomberg

Your local ETF is going backwards due to lack of diversification... Multi Asset World Wide funds currently hold about 60-80% offshore assets...

 
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bchip

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#54
If 51% beat the index, you'd have a very good case, but they don't, hence the ETF is the "safer" choice. As finding that winning fund is a gamble.
Im really curious how you differentiate the risk levels between an asset manager that chooses (eg 40 stocks)
and market cap that chooses the Top40 stocks (eg Satrix 40)?
Or how is picking an ETF not a gamble either?

In the passive fund you also still had Telkom, Anglo, BHP, Abil etc in the past couple of years.
Satrix Resi was a massively poor performer as well, amongst other ETFs

Sorry, Im just trying to understand your side of the arguement.
Are you saying that a formulae choosing a selection of stocks is "safer" than if a human selected it?

How do you argue that ETFs are better than human selection?

IMO the only difference between active and passive is simply the fees attached.
The strategies vary greatly and whether you choose a great manager or a great ETF its simply
a matter of your belief about that algorithm or mandate.
(eg Will Jon Biccards resources outperform or will Satrix Indi outperform next year)
 

Hendrix

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#55
My reasoning is that at least 75% of SA Actively Managed Equity Funds cannot even beat the ALSI over periods longer than a year.
So why not just buy an Index Tracker?, your chances are higher of success (75% vs 25%)

This applies to Industrial ETF's too:
Satrix Indi ETF (incl Divi's): 1 year 9.97%, 5 years 23.75%, 10 years 19.46%
Coronation Industrial UT: 1 year 7.69%, 5 years 23.77%, 10 years 18.82%

The Coronation Industrial Fund is the best performing Industrial fund I could find, its close in performance to the ETF, but after the high fees, you worse off, the other Industrial funds (OM, Stanlib, Momentum) lag considerably.

so why not just buy the index?

Obviously you cannot just buy Satrix Indi and assume it will beat almost everything in the future, as it has done in the past.
You will need to make an informed selection, but the stats prove that most General Equity funds don't even beat the ALSI or Top 40, so you are more likely to have better success buying a Top40 ETF.
 

Hendrix

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#56
Im really curious how you differentiate the risk levels between an asset manager that chooses (eg 40 stocks)
and market cap that chooses the Top40 stocks (eg Satrix 40)?
Or how is picking an ETF not a gamble either? - everythings a gamble, but history has proved time and again that few Actively managed funds beat the benchmark.

In the passive fund you also still had Telkom, Anglo, BHP, Abil etc in the past couple of years.
Satrix Resi was a massively poor performer as well, amongst other ETFs - true, but compare Satrix Resi to other Resourse funds, you cannot compare Satrix RESI to a General Equity Fund.

Sorry, Im just trying to understand your side of the arguement.
Are you saying that a formulae choosing a selection of stocks is "safer" than if a human selected it? - well, the stats say so, you can try pick a winning UT, but 75% of the time you will pick a loser.

How do you argue that ETFs are better than human selection? - they not always better, just the majority of the time, one or 2 UT's may have a good year or two, but that luck runs out eventually, and they lag the index eventually.

IMO the only difference between active and passive is simply the fees attached. - yep, so why pay high fees when there is a cheaper option with the same, and most often better performance

The strategies vary greatly and whether you choose a great manager or a great ETF its simply
a matter of your belief about that algorithm or mandate. - yep, there isn't a one fits all ETF, there are still decisions that need to be made

(eg Will Jon Biccards resources outperform or will Satrix Indi outperform next year) - I doubt STXIND can keep up the momentum its had over the years, but then again, it might, who knows...
 
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bchip

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#57
I see your point.
I guess the one hiccup that comes in is with considering people couldnt select a good asset manager
what are the chances that they can select a good ETF (especially considering how little research the average person does).

USA (eg) has over 1200 ETFs
"As of June 2012, the United States has about 1,200 ETFs,"
https://en.wikipedia.org/wiki/List_of_American_exchange-traded_funds

Filter this down to (eg) 10 or 20 ETFS has you so diversified that I cant imagine
anybody could make returns from that...and nobody would ever be able to get Alpha from that EVER.

How would the avg person know when to buy BIO or RESI or RETAIL etc?
versus giving it to an active manager who is suppose to be a professional.

I think the only thing the stats prove though is that the industry is full of conmen that know how to spin a story on the market,
but it doesnt really help you select a better investment strategy.

If you also consider some asset managers (even in SA) have repeatedly beaten the market
it all gets confusing and end up nowhere.

Not sure if there is an answer is to this one, because even right now there is a new "Buffet" somewhere
in the world to follow and in 30 years we'll all still be talking about "had we invested with... in 2016 we wouldve made..."
 

bchip

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#58
This applies to Industrial ETF's too:
Satrix Indi ETF (incl Divi's): 1 year 9.97%, 5 years 23.75%, 10 years 19.46%
Coronation Industrial UT: 1 year 7.69%, 5 years 23.77%, 10 years 18.82%
Thanks for this, very interesting comparison considering that Coronation got how many awards for being "the best"
 

Hendrix

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#59
Mr FX has a good point that multi asset is one of the best, I agree, unfortunately there are no multi asset ETF's. I'm a fan of the true Flexible UT's, especially with things as they are in this country.
I just feel one cannot compare them to ETF's, as they operate completely different.
Sygnia and 10x have Index UT's that are close, but they more to meet Reg 28 requirements, so are limited.
 
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