Top S&P beaters going down in flames

[mickeyd]

Both Bill Miller's LM Value Fund and Manu Daftary's Quaker SG fund are not going to beat the S&P 500 this year. There are 11 funds waiting in the wings that have beaten the S&P 500 over the last 7 years. Which one will claim Miller's post at the top of the heap?

This only demonstrates how difficult it is for managed funds to have a total return, year after year, that is superior to the index.

"Successful money management takes a combination of skill and luck," John Bogle, founder of the Vanguard Group, said. "In Miller's case, this is a year when he's run into more than his fair share of bad luck."
The Legg Mason manager's recent under-performance won't blemish an otherwise stellar long-term record, he added. "I admire his long-term focus and willingness to go against the crowd," Bogle said. "Bill's the real deal who brings a lot to the table."

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B5A90B475%2D3B49%2D4F1D%2DB5EE%2D4726C018FE36%7D&siteid=mktw&dist=nwhfunds

 

[Alex]

If you took 100 monkeys and had them flip a coin ten times in a row, a few of the monkeys would flip ten head or ten tails in a row. When a monkey does it, we call it "luck". When a mutual fund manager does it we call it "skill".

 

[jazz4cash]

When I read:

Both Bill Miller's LM Value Fund and Manu Daftary's Quaker SG fund are not going to beat the S&P 500 this year...........

I figured they lagged by a few per cent, but the underperformance is close to 10%!

 

[saluki9]

When I read:

Both Bill Miller's LM Value Fund and Manu Daftary's Quaker SG fund are not going to beat the S&P 500 this year...........

I figured they lagged by a few per cent, but the underperformance is close to 10%!

That's fine. There are some good active managers out there. The problem is that most fund managers want to create alpha AND have a low tracking error which is how you wind up with closet index funds.

A large underperformance from somebody with a history of alpha generation means that they made their bets and they were wrong, but at least they believe in their management. Most of the good active funds don't beat their index every year, that is just an unrealistic expectation.

 

[Ed_The_Gypsy]

When a mutual fund manager does it we call it "skill". laugh

Wouldn't it be nice to be paid as much as they are to throw those darts at the wall?

 

[Nords]

A large underperformance from somebody with a history of alpha generation means that they made their bets and they were wrong, but at least they believe in their management. Most of the good active funds don't beat their index every year, that is just an unrealistic expectation.

I think Tweedy claims that active managers, in aggregate, only manage to beat their index in two out of three years. Even worse, underperformance can last as long as three years...