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Why is this a Bad Thing??
Old 12-27-2006, 10:45 AM   #1
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Why is this a Bad Thing??

http://news.yahoo.com/s/ap/20061226/...utual_interest
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Re: Why is this a Bad Thing??
Old 12-27-2006, 11:12 AM   #2
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Re: Why is this a Bad Thing??

Because knowledge is a dangerous thing:
"Opponents argue that the disclosures will penalize funds of funds by making their expense ratios appear disproportionately large. They argue the expenses in the underlying funds are already reflected in the net asset value of those funds.
"It already has a fixed expense rate included in there," said Curtis Teberg, manager of an eponymous fund of funds. "I'm not paying $10 a share plus 50 cents per share in administration fees," he said, referring to his costs when buying shares of a fund.
He said the Teberg Fund, whose assets total $136 million, will see its reported expense ratio jump to about 4 percent from 2.33 percent."

"Only" 2.33% to 4%?!? Holy cow!

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Re: Why is this a Bad Thing??
Old 12-27-2006, 11:22 AM   #3
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Re: Why is this a Bad Thing??

Quote:
Many larger funds of funds, like those run by Vanguard Group, won't show a change in their expense ratios as many of the funds of funds they offer are built using in-house products. Vanguard's Total International Stock Index fund, for example, doesn't impose expenses of its own. The fund is made up of other Vanguard funds and the company can therefore simply absorb administrative costs for running the fund of funds.

Advocates contend the gains in transparency are worthwhile.

"Just about everyone in the industry says, 'You really don't expect me to compete with Vanguard on price do you?'"
This would be comical if it were not for the poor investors of funds that pay an ER on top of the ERs that they are based on. No doubt this fund will crater like so many others who try to out maneuver Vanguard and other efficiently run families.
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Re: Why is this a Bad Thing??
Old 12-28-2006, 10:31 AM   #4
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Re: Why is this a Bad Thing??

Quote:
Originally Posted by Nords
Because knowledge is a dangerous thing:
"Opponents argue that the disclosures will penalize funds of funds by making their expense ratios appear disproportionately large. They argue the expenses in the underlying funds are already reflected in the net asset value of those funds.
"It already has a fixed expense rate included in there," said Curtis Teberg, manager of an eponymous fund of funds. "I'm not paying $10 a share plus 50 cents per share in administration fees," he said, referring to his costs when buying shares of a fund.
He said the Teberg Fund, whose assets total $136 million, will see its reported expense ratio jump to about 4 percent from 2.33 percent."

"Only" 2.33% to 4%?!? Holy cow!

Another reason I don't like "fiund-of-funds". Would LOVE to see Russell Funds have to show their "real" expense ratios..........
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Re: Why is this a Bad Thing??
Old 12-28-2006, 01:09 PM   #5
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Re: Why is this a Bad Thing??

Maybe we should stick to the current rules and then Vanguard can advertise their funds of funds that have 0.00% expense ratios!

It is funny that most of vanguard's funds of funds list the composite expense ratio of the underlying funds and they are still way lower than most of the competing funds of funds that only list their top layer of added expenses.

How about Jeffrey J. Unterreiner, who manages the Opti-Flex Fund, who states "his results justify the costs." The fund, whose assets total about $6.5 million, is up 16.6 percent for the year, an average of 14.9 percent in the past three years and an average of 10.7 percent over five years. "Obviously, over the time period if I've been doing the management we've added value. And that's really the only reason we offer our services to anyone." Not the 2.4% expense ratio this dude collects. :

Mr. Unterreiner managed to beat the SP500 index (although basically equalled the SP500 in YTD). However the SP500 performed about the worst of any market segment over the last 1, 3, and 5 years. Look at other segments of the market (international, small cap, value, etc) and it is clear that Mr. Unterreiner didn't add much value at all. The total international index beat his returns by 8% and 5% per year over the 3 yr and 5 yr periods, respectively. I'm assuming he had access to international investments for at least part of his portfolio. Why couldn't he get some of those returns? Oh yeah, there's that whole expense drag holding him down. :
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Re: Why is this a Bad Thing??
Old 12-28-2006, 09:01 PM   #6
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Re: Why is this a Bad Thing??

Quote:
Originally Posted by justin
Maybe we should stick to the current rules and then Vanguard can advertise their funds of funds that have 0.00% expense ratios!

It is funny that most of vanguard's funds of funds list the composite expense ratio of the underlying funds and they are still way lower than most of the competing funds of funds that only list their top layer of added expenses.

How about Jeffrey J. Unterreiner, who manages the Opti-Flex Fund, who states "his results justify the costs." The fund, whose assets total about $6.5 million, is up 16.6 percent for the year, an average of 14.9 percent in the past three years and an average of 10.7 percent over five years. "Obviously, over the time period if I've been doing the management we've added value. And that's really the only reason we offer our services to anyone." Not the 2.4% expense ratio this dude collects. :

Mr. Unterreiner managed to beat the SP500 index (although basically equalled the SP500 in YTD). However the SP500 performed about the worst of any market segment over the last 1, 3, and 5 years. Look at other segments of the market (international, small cap, value, etc) and it is clear that Mr. Unterreiner didn't add much value at all. The total international index beat his returns by 8% and 5% per year over the 3 yr and 5 yr periods, respectively. I'm assuming he had access to international investments for at least part of his portfolio. Why couldn't he get some of those returns? Oh yeah, there's that whole expense drag holding him down. :
Yet I take a beating charging a management fee under 1% a year to manage stock portoflios..........I should have been a fund manager........... :
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