FYI: I will link interview early Saturday morning.
Regards,
Ted
Dear WEALTHTRACK Subscriber,
As we celebrate our tenth anniversary year on WEALTHTRACK we have been taking an in depth look at one of the biggest investment trends of the past decade, the huge migration of both institutional and individual investors from actively managed funds to passive, index-based ones, especially ETFs.
As we have reported before, index funds now account for a third of fund assets, up from 14% ten years ago. And recently exchange traded funds, or ETFs, have seen the lion’s share of the fund flows.
As Morningstar recently reported, U.S. ETFs have more than $2 trillion dollars in assets compared to nearly $13 trillion for all mutual funds, excluding money market funds. That means 14% of fund assets are now in ETFs, up from a mere 4% ten years ago.
During the current six year bull market index funds have outperformed the vast majority of actively managed funds. In addition, the cost benefits of index funds are considered to be overwhelmingly in investors’ favor, especially when compounded over time. The asset-weighted expense ratio for passive funds was just .20% in 2014, compared with 0.79% for active funds.
Even investors in active funds are opting for lower cost ones. During the past decade the lowest cost quintile of active funds received $1.07 trillion of the total $1.13 trillion dollars of the net new flows into actively managed funds.
With better performance and lower costs it’s hard to find anyone concerned about these developments. However this week we have an interview with a critic of the surge to passive investing. Not surprisingly, he is an active fund manager.
David Winters is CEO of Wintergreen Advisers and Portfolio Manager of the Wintergreen Fund, which he launched in 2005. He was nominated for Morningstar’s International-Stock Manager of the year award in 2010 and 2011.
He has been a WEALTHTRACK regular since the beginning because his traditional value–oriented, global approach worked for years. However the last five years have been rough. The fund has underperformed its benchmark and Morningstar World Stock category.
I spoke with Winters about why he thinks the move to index funds is a dangerous market mania, which puts retirees at particular risk.
If you miss the show on air this week, you can always catch it on our website. We also have an EXTRA interview with David Winters about the challenges of being an active manager during a six year bull market. Its available exclusively online. As always, we welcome your feedback on Facebook and Twitter.
Have a great 4th of July weekend and make the week ahead a profitable and productive one.
Best Regards,
Consuelo
Comments
Like Scott, I too look forward to the upcoming WealthTrack interview with David Winters. I learn from a master.
It will be informative to learn if some of his fundamental guideposts have changed recently. To test that possibility it is instructive to contrast a past interview with the one that Ted will post. Here is a Link to last year's video interview:
http://wealthtrack.com/recent-programs/david-winters-different-drummer/
Any substantial changes will be revealing.
Best Wishes.
Doesn't mean he wouldn't have something to say of consequence.
Winters has said that he believes in various themes including the rise of the emerging market consumer. The other theme that kind of ties in with that is luxury goods as Winters has believed that emerging consumers will want similar things. He's run into issues with emerging markets, plus a crackdown in China on luxury goods and a horrible period for Macau.
His tobacco stocks have worked out okay, but other themes (Canadian oil and gas is another) have basically been where you do not want to be in recent years.
Last, but certainly not least was the horrible idea of going after Coke as an activist. It got him nothing (and he should have seen that coming) and Buffett finally got to a point where he verbally really let Winters have it on air.
This was what Buffett said:
http://www.mutualfundobserver.com/discuss/discussion/19369/buffett-on-david-winters-wintergreen
I know there is a view for the longer term and Winters has said as such. That said, it remains to be seen how long investors tolerate it.
That doesn't even get into the fees and minimum because Winters has compared Wintergreen to a hedge fund, despite the fact that he's rarely ever used any such tools.
Thank you for the superior summary of David Winters’ year long decision making slump. Given the quality of all your posts, I expect nothing less.
It seems like Winters has bumbled and fumbled from one bad decision immediately after another. Slumps happen.
That is definitely not the David Winters of 10 years ago when he abandoned Michael Price’s Mutual Series of funds. Winters had the opportunity to learn from two investment grandmasters, both from Price and for a short time from Max Heine. Considering the lapsed time, perhaps he is forgetting or misapplying the lessons and rules that they passed to him.
That’s especially why I am anxious to see the upcoming interview. It will allow us to contrast the high-riding star manager of yesteryear against the down-to-earth struggling manager of today.
Less importantly, I’m also intrigued by how Consuelo Mack will conduct the interview given that the Wintergreen funds are co-sponsors of her program. I anticipate she will do a competent, workwoman-like job. She is consistently polite, but does ask the tough questions.
Best Wishes.
I will keep this short, but it will not be sweet. I owned many Michael Price funds. David is a second string, overpaid, one-time wonder......a JV player, so to speak. His words are not worth my time. Also, all Price students own tobacco....it's where the cash is.
God bless
the Pudd
p.s. NOW, I'll tell ya how I really feel.....
CHART
@scott: "That said, it remains to be seen how long investors tolerate it."
Investors are not tolerating the fund's underperformance, as AUM have decreased from $1.67B (9/2014 per FundMojo) to the current $957M (per M*).
Kevin