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How actively managed funds are losing investors money
Investors with listed investment companies in 2019 would have collectively seen returns higher by $1.6 billion if they had instead invested into an index-tracking ETF, new research has suggested.
How actively managed funds are losing investors money
Investors with listed investment companies in 2019 would have collectively seen returns higher by $1.6 billion if they had instead invested into an index-tracking ETF, new research has suggested.
According to data released by robo-advisers Stockspot, almost all investment schemes listed on the ASX underperformed index funds, despite investors paying fees for actively managed listed investment companies (LICs).
The average one-year return for an Australian share LIC was 14.6 per cent, while investors in index funds portfolios grew by 25.1 per cent.
With global shares, LICs lagged by 19 per cent, producing an average one-year return up to 31 December of 11.4 per cent, while index ETFs gave 30.4 per cent.
Nearly a fifth of LICs were shown to have negative returns over the 12 months, while the share market rose by 25 per cent, Stockspot noted.
Marc Jocum, investment associate at Stockspot, had commented that 95 per cent of LICs had failed to achieve the returns of an index ETF over five years.
Globally, not one was able to beat a global market index ETF over the past 12 months despite having fees that were five times higher than the typical corresponding ETF.
“Index exchange-traded funds are what we recommended to Stockspot clients because they have consistently performed better than opaque, high-cost LICs over every time period,” Mr Jocum said.
“ETFs beat LICs because of their superior structure and because indexing almost always trumps active management.
“It saddens us to see many Australians are still getting pushed into poor performing LICs because of the commissions (aka stamping fees) paid to the brokers and advisers who recommend them,” he concluded.
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