Charley Ellis: Active Managers Take 100% Of Your Gains Hi Ted,
Thank you for posting this alert on yet another Charles Ellis short research paper extolling the virtues of Index investing.
You asked “If Haystackers (Indexers) are so right, why do they spend so much time trying to prove it.”
Part of an answer is that Indexers are not always “so right”. Yes Indexing outperforms a major fraction of actively managed mutual funds, but not all. There are environments when active managers do quite well.
But it is true that these periods of relative advantage have become shorter in duration, more difficult to predict along the time dimension, and much more difficult to identify
who will be the winners.
Ellis and Michael Mauboussian believe that one contributing factor in this complex equation is the advancing skill level of the institutional and professional players. If outcomes are determined by a combination of skill and luck, as skill becomes more equalized, luck becomes the dominant factor. And nobody foretells luck.
Also, there has been a sea change in terms of who investors trade against. In yesterday’s market, individual investors mostly traded with each other, so pricing anomalies were produced more often than in today’s marketplace. That’s because today’s transactions are dominated by professionals battling professionals in 90% of the instances. Pricing mistakes are rarer.
Even given the rising popularity of Index investing, it is still a small percentage of Wall Street activity. Much of the recent gains is due to Institutional participation at a higher level.
Many individual investors are ill-informed, are misdirected by financial outfits, are slow learners. Therefore, the “beating of the drums” is necessary to engage the general public’s attention. And advertisers have learned that that message must be repeated again and again and again and……. McDonalds and Fidelity have both learned that lesson well.
Yes, Charles Ellis is now a hired gun, but I believe he came to his current investment philosophy honestly by research and by experience. His studies and opinions are to be trusted and to be given considerable weight when assembling a long-term portfolio. A long time ago, he warned us to the dangers of the Loser’s Game, and later produced a book of strategies to win at that game.
When Charles Ellis speaks, I listen(I've heard this before, but it is more appropriate when applied to Ellis).
Best Wishes.
Charley Ellis: Active Managers Take 100% Of Your Gains
Ouch Funds 2014 everything growthy, small and european has been lagging YTD. i added a percent to growthy MC and 2% to EAFE benchmarked thingies. also, put 1% into CBI. ....... i don't have any defined benefit pension waiting in the wings and capital preservation is one of the goals.
@fundalarm: what was the growthy megacap name you added a percent to?
Not sure what you mean by CBI....I take it you are not referring to Chicago Bridge & Iron Company
2% into EAFE things: EFA and IEFA are lagging a lot, so that certainly fits the theme of buying what has not done well recently.
You mentioned Europe, so I looked up FEZ and FEU. I'd have to look up the difference between the two, but both lagging quite a bit.
I never had access to a defined benefit plan either. I would have had to find a government job to get a defined benefit plan.
Ouch Funds 2014 everything growthy, small and european has been lagging YTD. i added a percent to growthy MC and 2% to EAFE benchmarked thingies. also, put 1% into CBI. i have been underweight equities for years since i felt my employment had very high correlation to the equity market. i now feel a bit more stable at work and am trying to get equities a bit higher. it's very painful for me, i have to admit. i don't have any defined benefit pension waiting in the wings and capital preservation is one of the goals. so i lack the risk tolerance of our chief linkster. but slowly and surely am on the way to get half of my portfolio in equities.
Q&A With Barry James,Co- Manager, James Balanced Golden Rainbow Fund
WCM Alternatives: Event-Driven Fund (Westchester Capital Management) (WCERX) No problem. Westchester Capital Funds is the parent investment company of both MERFX and WCERX.
Their web site is www.westchestercapitalfunds.com.
Wasatch Micro Cap Value Fund I also own WAMVX, GPROX, BRUSX and WSCVX in taxable accounts. It appears that you have several small cap value funds.
I suspect that if you have held WAMVX since 2003, then you probably have substantial capital gains in the fund as I note my WAMVX value has more than doubled in the last couple of years since I made my initial investment; I have made no additional investments since that time.
You don't mention if WAMVX is in a taxable or non-taxable account.
I have been quite pleased with Grandeur Peaks management/investment team with how they have handled their funds.
WCM Alternatives: Event-Driven Fund (Westchester Capital Management) (WCERX)
Long-Term U.S. Treasury Yields Near 2014 Low These new lows translate into capital appreciation for holders of LT treasuries...as Mark Twain once commented:
"...reports of my death was an exaggeration!"
