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1.Market Observations

25 Jun 2014 (AFR) – How to pick a closet index fund

[COMMENT: An article in this week’s Smart Investor pages of the AFR on managed funds. Also see an earlier article on a very siilar topic – Transparency will flush out the closet indexers.]

(25 June 2014, AFR, Smart Investor, p21, Matthew Smith)

‘Some of Australia’s biggest fund ­managers are continuing to charge top dollar for managing portfolios that look almost identical to the index at a time when costs and results are being ­scrutinised across the board.’

‘It’s a practice known as “hugging the benchmark”, where highly paid fund managers preside over funds that look almost identical to much lower-cost index products. In an up market these funds might continue to perform well, but if market drops, it’s likely some of these funds will be found out and investors’ savings are likely to be at stake.’

Read the full article at AFR.com (might need AFR login aceess)

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