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10/3/2017

2 Comments

Do You Want Low Returns With Your High Fees?

 
​The Australian share market gained almost 12% in 2016, but the 700 funds trying to beat it returned only 9.2% on average. In fact, a quarter of them returned less than 6% after fees. That’s the finding of a new survey by S&P Dow Jones Indices which found most Australian “active” funds still fail to beat their benchmarks.
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The SPIVA Scorecard, published by S&P Dow Jones Indices since 2002, found more than 80 per cent of international equity and Australian bond funds, and more than 70 per cent of Australian general equity and A-REIT funds, underperformed their respective benchmarks over the past decade.

Looking at 2016 in isolation, Australian large-cap equity funds posted an average return of 9.2 per cent and the S&P/ASX200 gained 11.8 per cent, with 76 per cent of funds underperforming the index.

Over five and 10-year periods, 70 per cent and 74 per cent of Australian large-cap equity funds failed to beat the S&P/ASX200, respectively.

But when it comes to Australian-domiciled international equity funds, Australian bond funds and Australian A-REIT funds, all have underperformed their benchmarks over the past decade.

Download a copy of the SPIVA report here.
2 Comments
Mike
13/3/2017 04:19:11 pm

The really crazy thing about this is that you are actually having to pay more fees to access to this underperformance. Retail investors can only access most managed funds by using an investment platform which might charge. 5 to 1%, then you have to pay an advisor fee. The typical adviser charges 1%, so the average is closer to 4%, not 6%.

Reply
Tony
29/3/2017 07:53:32 pm

Hey Mike, that is true, but admin fees have come down and are mostly 0.5% or a bit less. With respect to advice fees, people need to hold their advisers accountable and ensure they are getting value for that spend.

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