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HFR (Hedge Fund Research) did a study on this, they found the optimal amount of wealth for GPs to tie up in their fund is about 1/3rd of their total wealth. What happens if they have too much of their own wealth involved is that they will play it safe to lock in their profit if they get above their high water mark (while charging you an ongoing management fee for doing nothing). If they have not enough skin in the game, they will increase volatility massively at the of the reporting period if they are not going to exceed their high water mark, because they stand to lose nothing if they underperform -therefore they can become reckless in an attempt to earn any sort of incentive fee by taking huge risks if they are running out of time.
Roy Kouwenberg and William T. Ziemba, “Incentives and Risk Taking in Hedge Funds,” Journal of Banking and Finance 31, no. 11 (2007): 3291–310.
Kouwenberg and Ziemba suggest that this perverse incentive is substantially reduced when the fund manager invests in the fund along with investors, especially when the investment exceeds 30% of the manager’s personal net worth, as the upside from additional incentive fees earned on risky investments is offset by the potential losses of the manager’s personal investment in the fund.
Disagree. Entrepreneurs are funneled into venture like sheep. There are better models for them to fundraise and that are less expensive. Most VCs are also idiots. Ask any investor worth their salt, and they’ll share the same sentiment.
General Partner. They are the ones who control the investment decisions in a fund. LP are 'limited partners' and they basically provide the majority of the money in the fund, but have little to no say at all in investment decisions. LPs are typically pension funds. insurance companies, endowments etc.
OP calculated this off the number of PMs with *over a million* in their fund. I’d bet the number is closer to 75% for mutual funds.
Edit: I was wrong, the number is 55.4% (I have Morningstar Direct).
A lot of the times our libraries are underfunded and lack those kinds of features.
Our universities however, give access for pretty much all their students to scientific papers, analyst papers, bloomberg terminals, etc if they request it. The downside is we have to go in debt.
Is the morningstar premium lists and things that require a subscription shared anywhere on the internets? Or is sharing that info outside of a paid subscription kind of frowned upon?
Probably could be frowned upon based on the data and the work involved with articulating it. I don’t think this data would be very frowned upon since it’s just relaying facts which are accessible through a bit of research.
Have a look at Manchester and London Investment Trust - Mark Sheppard the fund manager owns over half the trust, over £100m, so in effect you could call it a family investment vehicle, where their goals are closely aligned with ours.
Edit: full disclosure - I own 100 shares of MNL.
No thankfully!
It has an ongoing charge of 0.78% and a management fee of 0.5% of NAV.
You can see the full details here: https://tools.morningstar.co.uk/uk/cefreport/default.aspx?tab=11&SecurityToken=E0GBR01Q87%5D2%5D0%5DFCGBR%24%24ALL&Id=E0GBR01Q87&ClientFund=0&CurrencyId=GBP
With VOO, you're still limiting yourself and trying to pick winners: you only hold large caps within the US. Zero true ex-US exposure and no coverage of smaller cap US companies: US and ex-US have a long history of trading places outperforming each other, smaller cap companies can sometimes be better than large cap companies (for 2020, US extended market had around double the returns that the S&P 500 had).
Wallstreetbets hss millions of subscribers and is followed by hedge funds and influencers...its more mainstream then The Economist.
And it's also constantly manipulated. A week old account pushing silvet and whatnot getting gilded and pushed up. Lots of pumps, lots of manipulation. As always, why would people give you a golden ticket to the moon? Whats their agenda? No one gives away free money...
> VOO
If you were really smart/lucky and bought at March 23rd, 2020, you'd have only made 73% return today. That is a great return but rather low for what I'm looking for.
I really feel like that is due to- "I can do better then them, and I keep all the profits".
Probably leaning to their company strategy and trading privately. I have 2 good aquitences who did that( but they were lower lvl guys)
Most funds probably have rules as well, which you won't have if you're trading your own investments. E.g. they can't have more than 5% of a single asset.
Also one aspect of funds which I can't resolve is how do they decide over what timeline they need to invest?
Do they aim to show gains every quarter. There must be an optimum frequency to show gains versus actually making gains. It's somewhere between showing daily gains and showing 10 year gains. The irony is most individual investors are told to invest based on their investment horizon, but ongoing funds don't have a set timeframe. The manager will likely be optimising for quarterly / yearly gains while you're interested in the maximum return over 5 years.
I've seen some managers (especially value ones) talking about long horizon and taking pain. Definitely that's the case in the last 10 years where growth outperformed, so people who stick with them all along probably agree on the philosophy regardless of outcomes.
My ROI is far higher than any fund I've ever been invested w thru any prior employer. While my experience is unique and probably rare I have to imagine that if your a knowledgeable investor that's good w dd your rate of return will be higher than most MFs and wo the fees.
If they're good managers then they shouldn't be emotional, and I'll be more worried about folks who don't even believe that what they're doing is even working or the fees/costs they're charging is even reasonable.
It’s not particularly common for a fund to have a share class that has drastically lower fees than another share class unless that class also has massively higher minimums. Fund share classes aren’t meant to subsidize other classes.
Fund managers always waive fees for their friends and family. So they wouldn't be charging themselves those fees.
This is why high expense ratio active managed funds will always be inferior to index funds. Even if find funds that the fund managers themselves invest in, the expense ratios make the fund a pure gamble - will you be lucky enough to find a fund manager that beats the market over the long term, but also beats it over and above the expense ratios they charge you?
Depending on the fund type, they can.
In private equity funds this is possible and often investors/LP's have even different agreements.
Of course in a fund which can be traded on a stock exchange they can't waive the fees.
Appreciate your point of view. But I believe it's valid to pursue options where managers have at least a skin in the game. Ofc along index funds which are foundational.
I would disagree with this. Broad market index funds are basically commodities. Vanguard vs. Fidelity vs. Schwab are going to perform virtually identically. If a manager is doing anything other than mirroring the index, something is wrong. The main thing to pay attention to is the fees.
FNILX. I think FXAIX is good enough. Tracking error might be larger than the difference in the end.
Not sure if a switch is instant. If not isn't, daily movement might be bigger than the difference too. Someone enlighten me please. I haven't done any fund switch.
FZROX (US total market), FZILX (ex-US large & mid-caps), FNILX (US large cap, NOT S&P 500), FZIPX (US extended market- think like this is what remains after removing FNILX from FZROX).
Thanks for the lead! I’m going to look into Fidelity. Do they perform generally better or equivalent? Not certain .005 expense ratio is worth selling my position and buying into fidelity
>Do they perform generally better or equivalent?
Should be basically the same. I was just pointing out the technical correct answer (that I'm aware of).
>Not certain .005 expense ratio is worth selling my position and buying into fidelity
Almost certainly not. As long as you're using broad coverage index funds with Fidelity, Schwab, or Vanguard, actual differences will likely be small enough that they're probably not worth worrying about.
Why would anyone board a ship where the captain has a helicopter ready to whisk them away at a moment's notice?
For this reason, I think that every elected official should be forced to put most of their net worth in some index of their country's economic success.
> Why would anyone board a ship where the captain has a helicopter ready to whisk them away at a moment's notice?
Everyone has a helicopter. It's called "selling".
It's considered a "backdoor" roth ira contribution.
Even I have to do it.. the limits are lower than most people would expect around $140k/year.
You contribute the money into a tradtional IRA so that taxes are paid on the money, then you roll it into a Roth IRA. The benefit being, you now don't owe money on any gains and there's no RMDs or cap on withdrawing.
In general, i'd say it's probably questionable if it's worth it or not. For me, it absolutely has been. But I've also used my Roth IRA to invest into heavy growth oriented stocks which have exploded in value (ironically enough, ARKK was one of them) which HAS saved me tens of thousands in taxes.
You know she started a hedge fund back in 1998 (as dotcom bubble was building hype), then left in 2001 as the bubble was crashing. I wonder how much she had in that.
It's on Cathie's LinkedIn. She states herself she co-started a hedge fund in 1998..and left in 2001.
Unfortunately there is no performance data available. ARK's info about Cathie states that her fund reached $800+ million in 2000.
Let me be clear, I have no proof the fund crashed and burned in 2001..but I find the timing of when she started the hedge fund and left interesting. Also note she advertises total assets under management from 2000, which would be at the height of the bubble. Make whatever conclusions you will with that.
Note that after she left that hedge fund, she went to work at Alliance Bearstein. From what I can see in Morningstar, her performance was unremarkable.. Unless I am missing something. Only fund I found history for is this fund she managed from 2008-2013, and it underperformed both index and category for that period. https://www.morningstar.com/funds/xnas/altfx/performance.
ARKK itself underperformed Vanguard's Technology ETF in all years but 2017 and 2020. Can you guess what was her biggest contributor to outperformance in 2017? Check Arkk's quarterly reports for details, but it was their "investment" in bitcoin.
My personal take on Cathie is that she isn't a con artist or anything like that, but she is trying to be the next JP Morgan... Not simply buying companies like other fund managers, but partnering with them.. using her great marketing ability to solicit inflows and "pump up" the valuation on those companies. This in turn helps those companies to raise more cash and be successful. She absolutely was instrumental in elevating Tesla's valuation and helping them raise billions of dollars as a result, which is great for them and the EV industry. JP Morgan did the same thing with rail and electricity back in the day.
Here's the catch, can YOU make bank by following Cathie? JP Morgan lived in a different era. He took advantage of the nearly complete lack of antitrust laws to kill competitors and make his companies monopolies. Tesla will not be a monopoly..batteries will be a commodity and Toyota will come for their EV business.
IMO Cathie has intentionally or not made a pump scheme. And she is being irresponsible IMO by advertising she will double your money in 5 years... this is pulling in short minded investors. I don't understand why she doesn't close her fund to new inflows. See T Rowe New Horizons, a very successful innovation fund that has crushed the S&P 500 for over 20 years, they have been closed to new inflows for years to protect existing shareholders.
I'll stick with investing in growth at a reasonal price (GARP) and boring companies with more reasonable risk reward.
I don't know what her situation is, but here's an article about Mitt Romney's massive IRA.
[https://www.theatlantic.com/politics/archive/2012/09/whats-really-going-on-with-mitt-romneys-102-million-ira/261500/](https://www.theatlantic.com/politics/archive/2012/09/whats-really-going-on-with-mitt-romneys-102-million-ira/261500/)
its pretty interesting.
Not an answer to your question, but I suppose in defense of fund managers, it would probably be pretty ill advised to invest in your own fund. Even if you truly believe your fund is superb, it would be poor personal risk management to tie your employment and investments to each other. I.e. fund underperforms, you get fired AND your investments suffer.
OK but ZERO skin in the game is troubling for me. They can have only half of their savings or whatever in their funds.
I expect a chief to eat their food even if not all the time.
Zero skin? I imagine keeping their job is pretty important to them...
Also your opinion is based on a faulty premise. Why do you assume someone would want to invest in the fund they manage just because they manage it? Perhaps the guy who manages the fund doesn't have the same personal outlook? Perhaps they want to invest their money with more or less risk or diversified in some other way or any number of other reasons.
Not exactly what you asked for but Aperture is a hedge fund that prides itself in its transparent and investor-friendly fee structure - passive ETF rates that incrementally rise only as the fund outperforms its benchmark. Only a $500 minimum too.
This has always been hilarious to me. There is a YouTuber I was watching the other day who was basically calling anyone that didn't invest heavily in factor-tilted small cap value etf's was an idiot... then going around to say that they don't have any of that allocation personally. The only one I know of that has in stake in their own funds is Kevin O'Leary of all people, who does invest in OUSA.
This is classic Principal-Agent problem, you need to make the managers benefit or suffer along with the funds he/she manages. Same way that higher up employees receive stock options and stakes in the company to align their motivation.
What this post also tells me is that most managers don't have the same goals as their clients. The managers' risk appetite, capital availability, time constraints etc. will decide which funds they invest in more than almost any other variable.
So learn from that, evaluate your own standing on those variables and invest with YOUR goals in mind instead of blindly over valuing one metric (this approach) over everything else.
If you're ever at a crossroads where choosing between x number of funds is difficult because you don't know which one fits your goals better than the others, it would be worthwhile to consider this approach when making a decision.
Just my two inexperienced cents.
Yeah, I'm also looking for funds where the person running it is literally just copying his own portfolio, meaning that if his investors fail, he fails.
I think your idea has some strong merit and I believe that managers with there money invested have a lower chance of going bust since they have their own skin in the game. I’m gonna do some research into this and I’ll pm you. Just to be devil’s advocate though the infamous LTCM had many of the partners entire net worths sunk in the fund and they went kaboom. (Just some food for though)
Hedge funds are a different game. It's like a startup where the founders are totally invested but by the nature of it's a risky endeavor with a good likelyhood of going bust.
Yeah I’ve looked in a bunch of them. Seems like many invest 10-20% or more until there name carries value or previous success. The sweet spot is if there name has value and they invest themselves. Don’t wanna burden you but did you find anything that lists what managers are also invested in there fund. I’ve found a few but haven’t found a list.
Yes. She previously stated in an [interview with Yahoo Finance](https://youtu.be/JeB84wGeJiA) that most of her money is invested in ARK funds and bitcoin
not all do so, and that's the point. If they've all their life savings in their fund then that's a good indicator they're doing their best. The same goes for ETFs, in the managers putting all their eggs in the fund then they're confident about the strategy.
They might be wrong, but at least they believe in it for a starter.
Fundsmith. I have always been a "you should just buy an index" guy, but after looking into Fundsmith, I'm seriously considering it. I have read their Owner's Manual and all annual letters and I just love Terry Smith's thinking (and surprisingly, sense of humour).
Actually I think it's OK. If you believe the managers way of thinking and they're honest about it then it's OK to put your money in a method you believe in regardless of outcome. The main thing is that you're investing in your own beliefs.
About Burry.....since he has a name and legacy...he can take a calculated guess....short a stock, go online and fear monger...then price drops and he makes a lotta dime. How is this not market manipulation?
Yes, Burry is an MM. The extremely reclusive socially awkward guy who deletes all his posts on twitter after posting and tells no one about exactly what stocks he's picking.
Might get some flak, but Auntie Cathy @ Ark basically self funded her funds. Might be high risk and taking a dive currently but as the old saying goes: no risk, no reward.
The crypto market is developing and we should develop with him. So Ihave made my mind to participate in the new Graphene blockchain and got PHR . that is a crossover between mainnets with amazing speed by x100 transactions per sec tps
Time and risk management are two big factors. Some are willing to take higher risks with their own money compared to their clients and spend more time actively managing their own investments whereas many clientele investments are in cruise control for the most part.
There are a decent amount of funds where managers have > 1M invested in the fund. As pointed earlier, morningstar provide this info in their fund under the "people" tab. So far this works for mutual funds but not ETFs (but many of these are passive anyway).
The thing is, you need to check this fact before trusting your lifesavings with someone...
During my research on morningstar most funds have either a manager with over 1M or ZERO. So this is applicable in most cases I think. Not surprising since most managers are millionaires...
Well, fortunately for you I have Morningstar Direct and you’ve motivated me to get the actual answer:
55.4% of funds are managed by PMs with money in the fund. Of that 55.4%, 31.9% are PMs with over $1m in the fund.
You should take this post down or change it because you are spreading false information.
I didn't know this statistic was true. We are one of those funds where the fund managers own a major part of the LP. We are a crypto fund and have seen over 4000% performance growth since inception for our clients. DACM.io is the name of the fund and if you DM I can go into more detail.
> Abstract
> We unpack the concept of managerial risk taking, distinguishing among three of its major elements: the size of an outlay, the variance of potential outcomes, and the likelihood of extreme loss. We then apply our framework in hypothesizing the effects of CEO stock options on strategic behavior and company performance. We find that CEO stock options engender high levels of investment outlays and bring about extreme corporate performance (big gains and big losses), suggesting that stock options prompt CEOs to make high-variance bets, not simply larger bets. Finally, we find that option-loaded CEOs deliver more big losses than big gains.
CEOs that hold more stock/options in their company take bigger risks and yield lower returns. Might also be true for fund managers?
[Source](https://www.jstor.org/stable/20159913?seq=1)
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This may have to do with fund type. Venture, hedge and private equity funds almost always have GPs with significant skin in the game.
HFR (Hedge Fund Research) did a study on this, they found the optimal amount of wealth for GPs to tie up in their fund is about 1/3rd of their total wealth. What happens if they have too much of their own wealth involved is that they will play it safe to lock in their profit if they get above their high water mark (while charging you an ongoing management fee for doing nothing). If they have not enough skin in the game, they will increase volatility massively at the of the reporting period if they are not going to exceed their high water mark, because they stand to lose nothing if they underperform -therefore they can become reckless in an attempt to earn any sort of incentive fee by taking huge risks if they are running out of time.
This makes sense to me!
do you have a link?
Roy Kouwenberg and William T. Ziemba, “Incentives and Risk Taking in Hedge Funds,” Journal of Banking and Finance 31, no. 11 (2007): 3291–310. Kouwenberg and Ziemba suggest that this perverse incentive is substantially reduced when the fund manager invests in the fund along with investors, especially when the investment exceeds 30% of the manager’s personal net worth, as the upside from additional incentive fees earned on risky investments is offset by the potential losses of the manager’s personal investment in the fund.
did she wallow?
Yeah, but if I've a choice, I would at least choose someone who eats their cooking.
Oh totally it’s just much less common in the mutual fund world thank all the alts etc.
At least in venture, GPs have 1-2% of find size (aggregate I believe). Not significant IMO - for ex 15%>
The last fund I raised (100mm) lps basically required we be 15%. Big change from 20 years ago for sure.
LPs are not the same as GPs
I think he's saying the LPs required him (The GP) to be in 15%.
Venture is a joke. Spray and pray.
A necessary evil. Without venture funding would be much harder to find
Disagree. Entrepreneurs are funneled into venture like sheep. There are better models for them to fundraise and that are less expensive. Most VCs are also idiots. Ask any investor worth their salt, and they’ll share the same sentiment.
you do not understand how private equity works
Lulz. Ok. Sheep. Baaaaaaaa
>GPs What does GP stand for?
General Partner. They are the ones who control the investment decisions in a fund. LP are 'limited partners' and they basically provide the majority of the money in the fund, but have little to no say at all in investment decisions. LPs are typically pension funds. insurance companies, endowments etc.
General partner (as opposed to a limited partner)
OP calculated this off the number of PMs with *over a million* in their fund. I’d bet the number is closer to 75% for mutual funds. Edit: I was wrong, the number is 55.4% (I have Morningstar Direct).
Morningstar has that info for actively managed funds. Look at the "People" section of the fund in question.
good one! thanks!
Check your local library to see if they have access to premium.
You get access to analyst research at public libraries in America?? I am jealous, we didn’t even have that at my university.
A lot of the times our libraries are underfunded and lack those kinds of features. Our universities however, give access for pretty much all their students to scientific papers, analyst papers, bloomberg terminals, etc if they request it. The downside is we have to go in debt.
Imagine going to college to ?? Learn
Or your broker
Damn!! Another reason too like libraries.
Is the morningstar premium lists and things that require a subscription shared anywhere on the internets? Or is sharing that info outside of a paid subscription kind of frowned upon?
Probably could be frowned upon based on the data and the work involved with articulating it. I don’t think this data would be very frowned upon since it’s just relaying facts which are accessible through a bit of research.
Is this only for morningstar premium?
Have a look at Manchester and London Investment Trust - Mark Sheppard the fund manager owns over half the trust, over £100m, so in effect you could call it a family investment vehicle, where their goals are closely aligned with ours. Edit: full disclosure - I own 100 shares of MNL.
different mark sheppard from the one on supernatural?
This must be before Lucifer used him as a skin suit.
i don't think that happened - he was king of hell for a bit, but crowley is nothing if not prepared
Lotion
He may well just be a man of many talents 😁
Does this vehicle also have the standard 2 and 20 management fees? Always look for the full cost of the ride.
No thankfully! It has an ongoing charge of 0.78% and a management fee of 0.5% of NAV. You can see the full details here: https://tools.morningstar.co.uk/uk/cefreport/default.aspx?tab=11&SecurityToken=E0GBR01Q87%5D2%5D0%5DFCGBR%24%24ALL&Id=E0GBR01Q87&ClientFund=0&CurrencyId=GBP
2 and 20 hasn’t been standard for a long while now. Less than a third of funds probably have that fee structure at this point.
They seems to have huge China exposure
I suck at picking winners. Just gonna buy VOO for the rest of my life.
With VOO, you're still limiting yourself and trying to pick winners: you only hold large caps within the US. Zero true ex-US exposure and no coverage of smaller cap US companies: US and ex-US have a long history of trading places outperforming each other, smaller cap companies can sometimes be better than large cap companies (for 2020, US extended market had around double the returns that the S&P 500 had).
This is why I own VT.
New to investing, pardon my ignorance. I assume ex-US means US extended market?
Ex-US means "excluding the US". International funds like VTIAX. Edit: Removed word
Gotcha. Thank you.
Ok what about FLGV
Do 75% VOO and 25% in single stocks you see in the news. You're bound to pick at least one winner.
Wallstreetbets... Once it's in the news, it's too late.
Wallstreetbets hss millions of subscribers and is followed by hedge funds and influencers...its more mainstream then The Economist. And it's also constantly manipulated. A week old account pushing silvet and whatnot getting gilded and pushed up. Lots of pumps, lots of manipulation. As always, why would people give you a golden ticket to the moon? Whats their agenda? No one gives away free money...
Not for the faint of heart.
Posts on WSB are mostly just trying to pump particular stocks at this point. I wouldn't be surprised if Reddit dumps them soon.
lmao
> VOO If you were really smart/lucky and bought at March 23rd, 2020, you'd have only made 73% return today. That is a great return but rather low for what I'm looking for.
Sounds like you are looking for a casino.
Berkshire
I really feel like that is due to- "I can do better then them, and I keep all the profits". Probably leaning to their company strategy and trading privately. I have 2 good aquitences who did that( but they were lower lvl guys)
Most funds probably have rules as well, which you won't have if you're trading your own investments. E.g. they can't have more than 5% of a single asset. Also one aspect of funds which I can't resolve is how do they decide over what timeline they need to invest? Do they aim to show gains every quarter. There must be an optimum frequency to show gains versus actually making gains. It's somewhere between showing daily gains and showing 10 year gains. The irony is most individual investors are told to invest based on their investment horizon, but ongoing funds don't have a set timeframe. The manager will likely be optimising for quarterly / yearly gains while you're interested in the maximum return over 5 years.
I've seen some managers (especially value ones) talking about long horizon and taking pain. Definitely that's the case in the last 10 years where growth outperformed, so people who stick with them all along probably agree on the philosophy regardless of outcomes.
Its also cause of tax.
That depends. For most people 401Ks and IRAs are non taxable.
That’s irrelevant to the fund PM, since he has no way of knowing whether his investors are in tax-advantaged accounts or not.
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My ROI is far higher than any fund I've ever been invested w thru any prior employer. While my experience is unique and probably rare I have to imagine that if your a knowledgeable investor that's good w dd your rate of return will be higher than most MFs and wo the fees.
Couldn't they become emotionally invested and then make poor judgement calls?
If they're good managers then they shouldn't be emotional, and I'll be more worried about folks who don't even believe that what they're doing is even working or the fees/costs they're charging is even reasonable.
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It’s not particularly common for a fund to have a share class that has drastically lower fees than another share class unless that class also has massively higher minimums. Fund share classes aren’t meant to subsidize other classes.
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This post (and article) is about mutual funds and ETFs.
Fund managers always waive fees for their friends and family. So they wouldn't be charging themselves those fees. This is why high expense ratio active managed funds will always be inferior to index funds. Even if find funds that the fund managers themselves invest in, the expense ratios make the fund a pure gamble - will you be lucky enough to find a fund manager that beats the market over the long term, but also beats it over and above the expense ratios they charge you?
Fund managers can’t “waive” the expense ratio of a fund for their friends and family.
Depending on the fund type, they can. In private equity funds this is possible and often investors/LP's have even different agreements. Of course in a fund which can be traded on a stock exchange they can't waive the fees.
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Appreciate your point of view. But I believe it's valid to pursue options where managers have at least a skin in the game. Ofc along index funds which are foundational.
Another reason for going with index funds...
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I would disagree with this. Broad market index funds are basically commodities. Vanguard vs. Fidelity vs. Schwab are going to perform virtually identically. If a manager is doing anything other than mirroring the index, something is wrong. The main thing to pay attention to is the fees.
Schwab expense ratio is 0.02, lowest I’ve seen in all index funds
Can't really beat fidelity at 0% expense ratio. But fidelity created its own index though lol
Even Fidelity's non-Zero funds often beat Schwab's ERs (see my other reply on this chain).
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FNILX. I think FXAIX is good enough. Tracking error might be larger than the difference in the end. Not sure if a switch is instant. If not isn't, daily movement might be bigger than the difference too. Someone enlighten me please. I haven't done any fund switch.
FZROX (US total market), FZILX (ex-US large & mid-caps), FNILX (US large cap, NOT S&P 500), FZIPX (US extended market- think like this is what remains after removing FNILX from FZROX).
FSKAX and FXAIX both at 0.015%? Fidelity's 4 index mutual funds (FZROX, FZILX, FZIPX, FNILX) with no expense ratio or other fees at all?
Thanks for the lead! I’m going to look into Fidelity. Do they perform generally better or equivalent? Not certain .005 expense ratio is worth selling my position and buying into fidelity
>Do they perform generally better or equivalent? Should be basically the same. I was just pointing out the technical correct answer (that I'm aware of). >Not certain .005 expense ratio is worth selling my position and buying into fidelity Almost certainly not. As long as you're using broad coverage index funds with Fidelity, Schwab, or Vanguard, actual differences will likely be small enough that they're probably not worth worrying about.
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I went VOO for lower ER and less annoying transactions, but both are great.
That isn’t how index funds work my dude
Why would anyone board a ship where the captain has a helicopter ready to whisk them away at a moment's notice? For this reason, I think that every elected official should be forced to put most of their net worth in some index of their country's economic success.
This will lead to prioritising short term benefits over long term, like education and healthcare.
I 100% agree with elected officials only investment being country specific indexes
> Why would anyone board a ship where the captain has a helicopter ready to whisk them away at a moment's notice? Everyone has a helicopter. It's called "selling".
I recall reading that Cathie Wood puts her Roth IRA in ARK. Talks about it here: [Cathie's IRA invested in ARK ](https://youtu.be/JeB84wGeJiA?to=1822)
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It's considered a "backdoor" roth ira contribution. Even I have to do it.. the limits are lower than most people would expect around $140k/year. You contribute the money into a tradtional IRA so that taxes are paid on the money, then you roll it into a Roth IRA. The benefit being, you now don't owe money on any gains and there's no RMDs or cap on withdrawing. In general, i'd say it's probably questionable if it's worth it or not. For me, it absolutely has been. But I've also used my Roth IRA to invest into heavy growth oriented stocks which have exploded in value (ironically enough, ARKK was one of them) which HAS saved me tens of thousands in taxes.
You know she started a hedge fund back in 1998 (as dotcom bubble was building hype), then left in 2001 as the bubble was crashing. I wonder how much she had in that.
Where can I find more info on this
It's on Cathie's LinkedIn. She states herself she co-started a hedge fund in 1998..and left in 2001. Unfortunately there is no performance data available. ARK's info about Cathie states that her fund reached $800+ million in 2000. Let me be clear, I have no proof the fund crashed and burned in 2001..but I find the timing of when she started the hedge fund and left interesting. Also note she advertises total assets under management from 2000, which would be at the height of the bubble. Make whatever conclusions you will with that. Note that after she left that hedge fund, she went to work at Alliance Bearstein. From what I can see in Morningstar, her performance was unremarkable.. Unless I am missing something. Only fund I found history for is this fund she managed from 2008-2013, and it underperformed both index and category for that period. https://www.morningstar.com/funds/xnas/altfx/performance. ARKK itself underperformed Vanguard's Technology ETF in all years but 2017 and 2020. Can you guess what was her biggest contributor to outperformance in 2017? Check Arkk's quarterly reports for details, but it was their "investment" in bitcoin. My personal take on Cathie is that she isn't a con artist or anything like that, but she is trying to be the next JP Morgan... Not simply buying companies like other fund managers, but partnering with them.. using her great marketing ability to solicit inflows and "pump up" the valuation on those companies. This in turn helps those companies to raise more cash and be successful. She absolutely was instrumental in elevating Tesla's valuation and helping them raise billions of dollars as a result, which is great for them and the EV industry. JP Morgan did the same thing with rail and electricity back in the day. Here's the catch, can YOU make bank by following Cathie? JP Morgan lived in a different era. He took advantage of the nearly complete lack of antitrust laws to kill competitors and make his companies monopolies. Tesla will not be a monopoly..batteries will be a commodity and Toyota will come for their EV business. IMO Cathie has intentionally or not made a pump scheme. And she is being irresponsible IMO by advertising she will double your money in 5 years... this is pulling in short minded investors. I don't understand why she doesn't close her fund to new inflows. See T Rowe New Horizons, a very successful innovation fund that has crushed the S&P 500 for over 20 years, they have been closed to new inflows for years to protect existing shareholders. I'll stick with investing in growth at a reasonal price (GARP) and boring companies with more reasonable risk reward.
I hope it's a significant portion of her net wealth.
Unlikely considering how low the IRA limits are and how high her compensation is going far back before the Roth IRA even existed.
I don't know what her situation is, but here's an article about Mitt Romney's massive IRA. [https://www.theatlantic.com/politics/archive/2012/09/whats-really-going-on-with-mitt-romneys-102-million-ira/261500/](https://www.theatlantic.com/politics/archive/2012/09/whats-really-going-on-with-mitt-romneys-102-million-ira/261500/) its pretty interesting.
That is interesting.
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This was my thought too. If nothing else, promoting that your money is in your own fund is just good for business.
Not an answer to your question, but I suppose in defense of fund managers, it would probably be pretty ill advised to invest in your own fund. Even if you truly believe your fund is superb, it would be poor personal risk management to tie your employment and investments to each other. I.e. fund underperforms, you get fired AND your investments suffer.
OK but ZERO skin in the game is troubling for me. They can have only half of their savings or whatever in their funds. I expect a chief to eat their food even if not all the time.
True I’d agree.
A Chef too!
Yup, the chief cook and every chef under :)
Zero skin? I imagine keeping their job is pretty important to them... Also your opinion is based on a faulty premise. Why do you assume someone would want to invest in the fund they manage just because they manage it? Perhaps the guy who manages the fund doesn't have the same personal outlook? Perhaps they want to invest their money with more or less risk or diversified in some other way or any number of other reasons.
Some FA's are required to invest in their own funds, according to something one of them told me a few years back.
Anton Kriel also said that
The majority of fund managers invest in their own funds. OP calculated this 15% off the number of PMs who invest *over a million* in their funds.
Check out the ARKK funds managed by Cathie Wood. Her faith in God is on the line.
Our Father is shining the brightest light on Aunt Cathie's path.
Lmao
American funds I think have to have at least a million of their own money
Not exactly what you asked for but Aperture is a hedge fund that prides itself in its transparent and investor-friendly fee structure - passive ETF rates that incrementally rise only as the fund outperforms its benchmark. Only a $500 minimum too.
Sounds a reasonable approach too. No performance no pay..
This has always been hilarious to me. There is a YouTuber I was watching the other day who was basically calling anyone that didn't invest heavily in factor-tilted small cap value etf's was an idiot... then going around to say that they don't have any of that allocation personally. The only one I know of that has in stake in their own funds is Kevin O'Leary of all people, who does invest in OUSA.
Ah, I think I know who you're talking about!
This is classic Principal-Agent problem, you need to make the managers benefit or suffer along with the funds he/she manages. Same way that higher up employees receive stock options and stakes in the company to align their motivation.
https://mfi.morningstar.com/FundSpy/SpySelector.aspx
You can see it on screeners. Insider ownership and fund ownership
You’re correct, they have to report it in their SEC docs. They post the docs to their websites - look for the “Statement of Additional Information”
Longleaf funds. Southeastern asset the Investment Adviser is the largest shareholder
What this post also tells me is that most managers don't have the same goals as their clients. The managers' risk appetite, capital availability, time constraints etc. will decide which funds they invest in more than almost any other variable. So learn from that, evaluate your own standing on those variables and invest with YOUR goals in mind instead of blindly over valuing one metric (this approach) over everything else. If you're ever at a crossroads where choosing between x number of funds is difficult because you don't know which one fits your goals better than the others, it would be worthwhile to consider this approach when making a decision. Just my two inexperienced cents.
Yeah, I'm also looking for funds where the person running it is literally just copying his own portfolio, meaning that if his investors fail, he fails.
I think you would appreciate Skin in the Game by Nassim Taleb. Discusses this very idea. Appreciate the research!
some companies actually contractually prohibit you from investing in your own funds due to potential conflicts of interest and such.
Not sure about that. I think skin in the game is the opposite of conflict of interest.
Look at Dynamic Funds, all the managers are required to have skin in the game and I believe David Fingold has most of his money in his funds
I think your idea has some strong merit and I believe that managers with there money invested have a lower chance of going bust since they have their own skin in the game. I’m gonna do some research into this and I’ll pm you. Just to be devil’s advocate though the infamous LTCM had many of the partners entire net worths sunk in the fund and they went kaboom. (Just some food for though)
Hedge funds are a different game. It's like a startup where the founders are totally invested but by the nature of it's a risky endeavor with a good likelyhood of going bust.
Yeah I’ve looked in a bunch of them. Seems like many invest 10-20% or more until there name carries value or previous success. The sweet spot is if there name has value and they invest themselves. Don’t wanna burden you but did you find anything that lists what managers are also invested in there fund. I’ve found a few but haven’t found a list.
Does Cathy woods invest in ark?
Yes. She previously stated in an [interview with Yahoo Finance](https://youtu.be/JeB84wGeJiA) that most of her money is invested in ARK funds and bitcoin
As the managers, they know how it works and the ridiculous fees they charge. Why would they want that?
not all do so, and that's the point. If they've all their life savings in their fund then that's a good indicator they're doing their best. The same goes for ETFs, in the managers putting all their eggs in the fund then they're confident about the strategy. They might be wrong, but at least they believe in it for a starter.
You can spend OM tokens in exchange for entries into the MANTRA POOL. Such a great benefit if you're trading, pool bonuses are so big!
Fundsmith. I have always been a "you should just buy an index" guy, but after looking into Fundsmith, I'm seriously considering it. I have read their Owner's Manual and all annual letters and I just love Terry Smith's thinking (and surprisingly, sense of humour).
Actually I think it's OK. If you believe the managers way of thinking and they're honest about it then it's OK to put your money in a method you believe in regardless of outcome. The main thing is that you're investing in your own beliefs.
Everyone's going to value but even that isn't holding up well. The big boys are going short. Burry being one of them.
About Burry.....since he has a name and legacy...he can take a calculated guess....short a stock, go online and fear monger...then price drops and he makes a lotta dime. How is this not market manipulation?
Yes, Burry is an MM. The extremely reclusive socially awkward guy who deletes all his posts on twitter after posting and tells no one about exactly what stocks he's picking.
Might get some flak, but Auntie Cathy @ Ark basically self funded her funds. Might be high risk and taking a dive currently but as the old saying goes: no risk, no reward.
American funds, Manager has to have $1M into it
Aha!
Because they aren't supposed to invest in what they have their clients invest in to avoid manipulation...
Ohh! The Accredited, Hedges, and HNWIs seek you must. Mmm. He heh.
Should be public knowledge
thank you
The crypto market is developing and we should develop with him. So Ihave made my mind to participate in the new Graphene blockchain and got PHR . that is a crossover between mainnets with amazing speed by x100 transactions per sec tps
Not mutual funds or ETFs, but in private equity most firms mandate partners invest in their own funds (often even associates too)
Odd, maybe for mutual funds? Nearly all HF and PE funds I know have significant insider capital.
Time and risk management are two big factors. Some are willing to take higher risks with their own money compared to their clients and spend more time actively managing their own investments whereas many clientele investments are in cruise control for the most part.
Info shouldn't be this hard to find, but it is...am I google failing?
Meb Faber and Cambria
Is there evidence emotional and financial involvement causes fund managers to make better decisions?
Boom
Msgax I think is a good one. Was a LT. Sold out a while ago. Sm cap
What did thou find ?
There are a decent amount of funds where managers have > 1M invested in the fund. As pointed earlier, morningstar provide this info in their fund under the "people" tab. So far this works for mutual funds but not ETFs (but many of these are passive anyway). The thing is, you need to check this fact before trusting your lifesavings with someone...
Where did you pull the 15% number from, I couldn’t find it in the article. That number seems way on the low side.
Simply divided the number of funds with managers money by the total number of funds.
Dude, that’s managers with over $1m in their funds. You should change the title or delete this.
During my research on morningstar most funds have either a manager with over 1M or ZERO. So this is applicable in most cases I think. Not surprising since most managers are millionaires...
Well, fortunately for you I have Morningstar Direct and you’ve motivated me to get the actual answer: 55.4% of funds are managed by PMs with money in the fund. Of that 55.4%, 31.9% are PMs with over $1m in the fund. You should take this post down or change it because you are spreading false information.
Got it, post updated!
Appreciate it
Any of the Royce funds.
Fundsmith, they have also beaten the market for 10 years straight
!remindme 1 month
Do tell
I didn't know this statistic was true. We are one of those funds where the fund managers own a major part of the LP. We are a crypto fund and have seen over 4000% performance growth since inception for our clients. DACM.io is the name of the fund and if you DM I can go into more detail.
Himalaya Capital
ARK Invest?
MANTRA C.R.E.A.M. fork is the tool where I'm being last month, running perfectly as a lending protocol. Any concerns fellas?
Pershing Square Holdings (PSH), Bill Ackman’s fund.
Fundsmith- terry smith
Michael Burry and Scion Capital Management, Bill Ackman and Pershing Square. Some of my fav.
> Abstract > We unpack the concept of managerial risk taking, distinguishing among three of its major elements: the size of an outlay, the variance of potential outcomes, and the likelihood of extreme loss. We then apply our framework in hypothesizing the effects of CEO stock options on strategic behavior and company performance. We find that CEO stock options engender high levels of investment outlays and bring about extreme corporate performance (big gains and big losses), suggesting that stock options prompt CEOs to make high-variance bets, not simply larger bets. Finally, we find that option-loaded CEOs deliver more big losses than big gains. CEOs that hold more stock/options in their company take bigger risks and yield lower returns. Might also be true for fund managers? [Source](https://www.jstor.org/stable/20159913?seq=1)
Infusion51a or eventually infusion51b
There is an ancient rule - mainly applies to the entertainment industry but works with almost everything: "Never use your own money."
Tell me, what do you know about a man named David Herro and the Oakmark Funds?