ITs vs Passives

[OZYU]

http://www.theaic.co.uk/aic/news/citywi ... ssive-etfs

Just came across this yesterday. Must say the results do not surprise me since our ITs, as a group, have done really well, many over decades.

Food for thought or debate maybe.

Ozyu

[nmdhqbc]

Interesting.

"the study does show that through a combination of active stock picking and gearing (the borrowing that many investment trusts use to boost returns), investment trusts are proven to deliver better performance "

I imagine it's very difficult to quantify, but I wonder how much of the performance is gearing vs stock picking. I'd probably consider ETF's that had a modest level of gearing to give its returns a helping hand. I presume they're not in existence and there's probably good reason for that. Whilst typing I think I may have thought of one reason why - essentially they're open ended so the % gearing could fluctuate erratically with inflow and outflows I guess.

[hiriskpaul]

I don't find it the least bit interesting. It is just another example of the lies and distortions to be expected from active fund managers.

An example lie is the reported return from global equity large cap. The FTSE World index is up over 150%, so what ETF have they found that only managed 70.8%? Whatever it is, it cannot be mainstream. Or has the number just been made up? Similarly for emerging markets, they give 67% for some unnamed ETF, but the FTSE EM index is up over 140%.

[77ss]

I don't find it the least bit interesting. It is just another example of the lies and distortions to be expected from active fund managers.

An example lie is the reported return from global equity large cap. The FTSE World index is up over 150%, so what ETF have they found that only managed 70.8%? Whatever it is, it cannot be mainstream. Or has the number just been made up? Similarly for emerging markets, they give 67% for some unnamed ETF, but the FTSE EM index is up over 140%.

Perhaps there is something I don't understand (very likely), but data I have found indicates that the World Index is up from 254 to 297 in $ terms over the past 10 years - which is the time scale cited in the aic article.

https://markets.ft.com/data/indices/tea ... s=AW01:FSI

Where do you get your 'over 150%' from?

[hiriskpaul]

Where do you get your 'over 150%' from?

AICs own published statistics are a good place to start historical comparisons. You would have thought that AIC might have done that before publishing such blatant nonsense.

The FT figures do not include reinvested dividends and is priced in dollars not pounds. Could convenient mistakes such as these be behind the ETF figures produced by the "renowned number crunchers"? Could that explain why Aaron is no longer an IT analyst at UBS?

[77ss]

Where do you get your 'over 150%' from?

AICs own published statistics are a good place to start historical comparisons. You would have thought that AIC might have done that before publishing such blatant nonsense.

I repeat my question.

If you want to fling around words such as lies, distortions and blatant nonsense, then I think it incumbent upon you to provide a link to your data source.

[hiriskpaul]

Where do you get your 'over 150%' from?

AICs own published statistics are a good place to start historical comparisons. You would have thought that AIC might have done that before publishing such blatant nonsense.

I repeat my question.

If you want to fling around words such as lies, distortions and blatant nonsense, then I think it incumbent upon you to provide a link to your data source.

Just look at the AIC statistics. They really are not hard to find.

[mc2fool]

You would have thought that AIC might have done that before publishing such blatant nonsense.

The AIC's site just republishes a feed from Citywire on ITs. The original article is at http://citywire.co.uk/investment-trust- ... s/a1004135 (you may like some of the comments there ), and that, of course, is reporting research from this guy, http://fund-consultants.com/about-us/4473299.

There's an email address on his site, why don't you ask him to justify himself -- or even invite him to join the discussion here

[hiriskpaul]

Citywire makes more sense and they could just be misrepresenting the research and incorrectly collating the numbers. AIC are obviously pro ITs, but I would not have expected them to make up something like this.

[mc2fool]

Citywire makes more sense and they could just be misrepresenting the research and incorrectly collating the numbers. AIC are obviously pro ITs, but I would not have expected them to make up something like this.

And they didn't, so your expectation has been met

[77ss]

AICs own published statistics are a good place to start historical comparisons. You would have thought that AIC might have done that before publishing such blatant nonsense.

I repeat my question.

If you want to fling around words such as lies, distortions and blatant nonsense, then I think it incumbent upon you to provide a link to your data source.

Just look at the AIC statistics. They really are not hard to find.

I note your reluctance to back up your specific assertion that

The FTSE World index is up over 150%

I draw my own conclusions.

[saechunu]

I note your reluctance to back up your specific assertion that

The FTSE World index is up over 150%

I draw my own conclusions.

Paul is correct: FTSE World 10yr total return is 151% according to Trustnet. Here's the chart:
https://www.trustnet.com/Tools/Charting ... height=370

The broader question is what data the original report's findings are based upon exactly. Without sight of the underlying data then it's not really possible to draw any useful conclusions as we don't know precisely what is being compared to what. Correct me if I'm wrong, but it doesn't appear that the report is publicly available, just this PR piece, so it's not really any use and should probably just be ignored.

[forlesen]

The broader question is what data the original report's findings are based upon exactly.

I think this may be hinted at in the article. It looks like the table is based on only those ETFs in each category with a 10 year performance record. After all, 9 of the 19 categories were omitted, because there were no representative ETFs at all with 10 year records.

It is possible that this methodology has biased the results, perhaps quite considerably.

To superficially test this, I had a look on Trustnet at 10 year ETF data for the Equity International sector (you have to customise their performance table to see this column). Only 22 out of the 161 ETFs have 10 year records. I eliminated the highest and lowest of these, both Proshares QQQ funds that amplify / short the market returns. Averaging the 10 year performance of the remaining 20 gives a figure of 98.6%. It's not that close to the figure of 70.8 tabulated in the article, but it's relatively close compared to the market return of 151% mentioned by Saechunu.

It seems likely that with more "careful" tweaking, the result in the table could be obtained, as there are a fair number of pretty poor performers among the 22.

All in all, I think it is too early to attempt a 10 year performance comparison between ITs and ETFs. Also, I personally would be more interested in such a comparison if it focussed on straightforward major index tracking ETFs. There appear to be relatively few of these in the 10 year ETF data set. Those that are present (e.g. iShares MSCI World UCITS ETF Inc USD, Lyxor UCITS ETF MSCI World D EUR, Lyxor UCITS ETF DJ Global Titans 50 D EUR) are all solid performers, around 130%.

[OZYU]

Your graph shows capital return only, over the last 10 years from memory, CTY has returned about 110%. Considering that CTY has a good yield, this is not an appropriate a comparison.

In any case the FTSE 250 is not a suitable index to compare with CTY if you look at its constituents, which are dominated by the FTSE 100. CTY, on the AIC performance data, would be compared with FTAS in fact.

Ozyu

Disc: We have held CTY for many decades, while Job Curtis is still in charge, this is unlikely to change. I keep an interesting comparison with a current demo HYP, it makes a surprising data set, with CTY winning 8-0 at the moment.

[OZYU]

Get on the AiC database, look at the CTY page, click on performance sub sheet. You will find that FTAS is the chosen comparator...

Oxyu

[saechunu]

The broader question is what data the original report's findings are based upon exactly.

I think this may be hinted at in the article. It looks like the table is based on only those ETFs in each category with a 10 year performance record. ...

I appreciate that. My point was that unless others can verify the results claimed - through access to the exact underlying data and methodology employed so as to allow them to reproduce the calculated results - those results don't really mean anything. The devil is often in the detail but in this case that detail is currently unavailable and so unverifiable.

Aberdeen Asset Management commissioned the report so they could if they chose publish it in full. If they did we could see whether or not the report itself details exactly what data underpins that table of results and all would become much clearer.

[mc2fool]

Here we go, 10 year total return City v FTSE100 v FTSE250.

Why does the first chart (capital only) say that Since Launch CTY is up 6637% but the second chart (total return) say it's only up 495%? Something wrong there, casting doubt on the rest of it ...

(As CTY was launched in 1891 6637% is believable, and 495% is not)

[OZYU]

I do find it fascinating that while City might well beat it's benchmark quite convincingly, a person who chose FTSE 250 tracker would have almost identical returns. Isn't that what the thread is really about? Buy a tracker and beat one of best respected IT's in the world?

CTY and FTSE 250 are not in the same segment of a balanced portfolio. In the 250 segment we own IPU, for example, no flies on that one held for quite a few years.

While you are at it, if you must compare oranges with lemons, then why not compare CTY with EQQQ(NASDQ) or Berkshire H. It won't look good either, nor will the 250. Now we own all three but we reckon all three are doing well in their segment. EQQQ is in fact the only tracker(with a bit of 'intelligence' built in that one) that we own.

Ozyu

[OZYU]

I read what you said and tried to give you my thoughts on it, and failed obviously.

Let me try again on what is interesting about it from my point if view.

The FTSE 250, barring the last year, had a very good time since the financial crisis and under QA. Apart from the last year, and we all know the special circumstances, the FTSE 100 over that same period found it a little harder to get going at times. So my view is that Job Curtis running CTY (now that you have the correct graph after I brought it to your attention by the way), has kept up with the 250 at all over the period. What is important is that he trounced the FTSE 100 over that period.

From time to time you can plot similar performance between two very different investments in different segments of the investing spectrum over a certain period. Personally I exercise restraint in drawing portfolio building conclusions from such events.

I'll leave it at that, garden calls with urgent tasks.

Ozyu

PS I started the thread because I think there are interesting aspects of ITs vs Trackers. They have not been aired yet. Might come back with my thoughts on the subject.

[Alaric]

In any case the FTSE 250 is not a suitable index to compare with CTY if you look at its constituents, which are dominated by the FTSE 100.

FTSE100 and FTSE250 don't overlap. It's the 350 and All Share which are dominated by the 100.