One who intends to leave others better off for his having existed.

3/4/15

Suggested City of Greensboro ICMA-RC fund changes by James Weight, Director, Relationship Management, Mid-Atlantic Region

If about a third of active managers who outperform in any given period aren't usually the same as in the next period, and S&P Dow Jones Indices "found that only two stayed in the top 25% through a four-year period," James is attempting to sell the equivalent of snake oil to Greensboro's fiduciaries again.


Not an index fund among them, other than the Vanguard 500 Index Admiral, which Greensboro already offers, but in which very little money is invested.


The single biggest predictor of mutual fund performance is fund expenses. The lower the expenses, the higher returns should be.  In the unlikely event an actively managed fund charging 1% consistently beats an index benchmark by 0.5%, a typical retirement plan investor would end up with a constant return of 50% less than its benchmark.

The less investors pay for investment and administration services, the more money should accumulate for retirement.  Passive portfolios holding stocks in broad-based market indices have substantially outperformed average active managers.

The one-third of active managers who outperform indices in any given period are usually not the same as in the next period.  

S&P Dow Jones Indices analyzed 715 top-performing mutual funds, 
focusing on U.S.-stock funds for the past four years through March, 
and found that only two stayed in the top 25% through a four-year period.

Wall Street Journal
9/8/2014


I first got into the investment return presentation business as a captive agent for Prudential, selling Variable Life Insurance.

The best performing fund at the time was a utilities fund, so that's where I recommended most of the people I sold insurance to invest.

Utilities ended up being the worst performing fund for the next several years.

What James Weight appears to have done here is a search for any funds that have recently outperformed, so the numbers look better than the current line up, except for the Vanguard Index fund which outperformed all of James' recommendations in the same category.

If about a third of active managers who outperform in any given period aren't usually the same as in the next period, and S&P Dow Jones Indices "found that only two stayed in the top 25% through a four-year period," James is attempting to sell the equivalent of snake oil to Greensboro's fiduciaries again.

Maybe that's why the biggest retirement plan in the country, the federal government's Thrift Savings Plan, created by federal employees for themselves, just uses low cost index funds.

And today;

http://www.marketwatch.com/story/beating-the-stock-market-has-become-even-harder-2015-01-07?link=MW_home_latest_news

As long as there are relatively few assets invested in index funds, and active managers are measured by trying to beat the indexes, low cost index funds will probably outperform the high cost active managers suggested by ICMA-RC.

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