Active managers of the world, unite. Mutual funds are getting battered again in the press for being too expensive, especially with regards to ETFs. One interesting article by Murray Coleman
in the Wall Street Journal
is the latest example.
To be sure, many of these arguments have been made before, repeatedly. But the point is that they are still being made and active managers don't seem to have many good rebuttals.
Some cases in point. The Economist
is running an article titled Against the odds
, with the ominous subtitle The costs of actively managed funds are higher than most investors realize.
The article hits upon many points frequently made by Vanguard
founder Jack Bogle
which perhaps we continue to ignore. For example, that it is hard to determine which fund managers will outperform in advance, that costs are really the only thing that investors can control, and so on.
The investment guru Mitch Tuchman, CEO of MarketRiders
has tapped into another way that fund managers shoot themselves in the feet: trading costs. He writes It's less and less surprising that actively managed funds have a hard time keeping up with plain-vanilla index products.
And let's not forget Coleman's article
in which he outlines some of the ways in which ETFs are kicking your butts.
Any lessons to be learned from this? Well, how about this one. Stop Suffering in Silence!
To summarize Bogle and the Economist, and all the rest, investors generally have no clue what will be the best asset allocations or fund managers, but the costs "are pretty certain." You can nitpick all you want over the precise numbers that particular gurus make in specific arguments.
You'll be fighting a passive-aggressive losing battle.
It may be time, again, for active managers to revamp their sales strategies. Some have waived some fees temporarily to get attention, but how long will that work?
If you are going to be in active management, own it and stick up for yourself. Find new ways to engage the investor. Say something to defend yourselves. Maybe you need to come up with a new reason, at least in the minds of investors, for your existence.
Say something, because right now silence is seriously not golden.
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