Research Affiliates, the asset manager, sub-advisory service and general investment think tank, publishes a newsletter monthly which, more often than not, is quite thought-provoking. I’d write a summary of the March 2009 issue, but when I forwarded a copy to Jonathan Chevreau (author of The Wealthy Boomer, columnist for the National post, Twitter Profile: http://twitter.com/JonChevreau) earlier today he dissected it much better than I could. You can read Jonathan’s thoughts by clicking here.
One point that that I’ll add to Jon’s notes are that the eVestment Alliance returns are GROSS of management fees, but do adjust for survivorship bias – meaning that they include the returns of now “inactive” funds.
If you would like to read the actual RAFI Fundamentals newsletter, you may click here.
The title of my post today is a quote taken from the article which is attributed to John Maynard Keynes, and every time I hear it, it brings a smile to my face so I thought i would share it in turn with you.
I did a statistical regression on the performance of major Canadian balanced funds based on MER, Net Asset, and # of equity holding. The regression was not statistically or economically significant.
Almost all major Canadian balanced funds had negative performance for the last 5 years. That means Canadian balanced fund managers were not under weighing equities when evaluation got high. When I looked into the individual balanced fund’s asset allocation, I was surprised that fund managers are not over weighing in equities in March 2009. That means if there is a significant recovery, Canadian balanced funds would not perform well.
@EconStudent: perhaps you should do the same analysis on tactical asset allocation funds as they have more room to manoeuvre. Balanced funds might just stick with a relatively static allocation between asset classes…