Stay active and enjoy the healthy returns
ACTIVE Fund Management involves the use of fund managers who pick which stocks to buy and importantly which stocks not to buy.
“At Campbell Thomson we believe in Active Fund Management,” says Richard Farquhar. “Fund Group fees for managing client money has recently been under the spotlight, heralding the rise in popularity of Passive (Tracker) Funds. These offer cheap investment – but at what cost? It depends on whether you are more concerned with the cost of the fund or the actual net return generated.
“Passives replicate a benchmark or Index by purchasing either all or a sample of the securities making up the particular index. Big companies in the market make up a large percentage of the index. For example, at the time of writing, a UK FTSE All Share Index fund, made up of the top 577 companies in the UK, will currently hold around 6.76% in Royal Dutch Shell and 3.25% in BP; while mining stocks make up another 4.83% of the index.
“Therefore investment in this sector via a Passive Fund means around 14% of your money is in oil and mining companies. Most people are aware of the falling oil price over the past two years and its effects on the oil industry.
“The slowdown in China has had a similar effect on the share price of mining stocks. In comparison, the active manager of our UK All Companies Sector investments, currently has 7.67% of his fund invested in these areas.
“So why Active? Data shows the FTSE All Share Index returned 29.49% over the past five years to 28 June. The IA UK All Companies Sector average returned 37.32% over the same time. Our preferred Active Fund Manager returned 51.4% over the same period, by far outperforming the Index.
“Active Funds’ returns are driven by the manager’s ability to select stocks, based on the fundamentals of the business. With the vote to leave the EU it will be more important than ever to use funds which can pick and choose which underlying stocks to hold.
“The majority are flexible around the sectors and the companies their fund invests with, giving the manager scope to find value and returns for investors.
“Passive Funds are forced to buy certain stocks simply in order to replicate the Index. Now, more than ever, is the time for good Active Managers to find value in the market.”
Contact Richard Farquhar, Campbell Thomson, Tel: 0141 353 0975.