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The fact that mutual fund managers have not been able to beat their underlying indexes is not new news. However, there is recent news stating these managers are still having difficulty beating the indexes. In an article from GlobeInvestor.com, the evidence has suggested that, “…Fewer than 20 per cent of large-capitalization Canadian institutional fund managers beat the index in the first quarter, according to a survey by Russell Investments Canada. That’s down from 41 per cent in the fourth quarter and the lowest reading since Russell started monitoring the data in 1999.” Performance has actually worsened in the most recent quarter.
Now, I am not one to put too much stock into such short term performance tracking. One quarter of poor performance should not matter to a dividend investor. However, what is more telling in the article is the discussion that occurs later on who has managed to more closely match that of the market. The highest percentage achieved of those who were able to beat the market was only 27%. A whole 73% of the mutual fund managers in Canada did not match performance. That is not a very promising story, and is especially bad when you consider that in Canada we have the highest mutual fund fees in the world then the story gets even more grim.
Now, I don’t want to be vindictive and totally slag on the mutual fund companies and their managers. These are people too who are tying to do their best. In fact, I can be accused of being an active manager as I buy individual stocks in my own personal dividend portfolio. However, I receive solace from the fact that I am making these choices on my own and not paying someone to underperform the market (I am currently performing better than the market). Paying for poor performance just does not make sense! So please, if I can request anything of my readers, please be sure to understand what you are paying in fees and always check the performance of your funds over a long (1+ years) period of time. If your funds are not at least meeting the market, then do something about it.
(Photo Credit: Steve Knight)