Thursday, January 25, 2007
Performance Fee
Some fund houses charge performance charge on top of management fee. As an investor, the total expense of a fund have to be clearly awared, as that's a matter about the net return. Yet, some fund house are charging investors in a fairer way than others.
For example, are these two fund hourse charging similar performance fee?
The VP Classic Fund have 41.24% return last year. As seen from Morningstar, the benchmark index raised over 70%! Before deducting management expenses, it performed at least 10% lower than the benchmark index, yet according to the rules, VP's management still got a performance fee (15% of profit)! As a result, investor got 30% less than benchmark return. Is it fair?
The Handerson Pan European Equity have 68.78% return last year, according to Morningstar. That's slightly above the benchmark index. The management was awarded a performance fee of just 0.4% (half year number, as shown in annual report).
The performance charges had a difference. One is 30 times of the other!
For the case of VP, as performance is measured not against benchmark, management got huge return because they are in a big bull market disregrad of under perform in the sector. Obviously, the structure for VP is too good for the fund house and unfair to investors.
Quite a lot of people like VP, but I believe they are charging too much, I would rather invest in funds with fair incentive structure.
For example, are these two fund hourse charging similar performance fee?
Value Partners
Management fee 1.25% p.a.
Performance fee 15% of profit (High on high principle)
Henderson
Magement fee 1.2% p.a.
Performance fee 10% of the Relevant amount
(where relevant amount is relative to corresponding sector index)
The VP Classic Fund have 41.24% return last year. As seen from Morningstar, the benchmark index raised over 70%! Before deducting management expenses, it performed at least 10% lower than the benchmark index, yet according to the rules, VP's management still got a performance fee (15% of profit)! As a result, investor got 30% less than benchmark return. Is it fair?
The Handerson Pan European Equity have 68.78% return last year, according to Morningstar. That's slightly above the benchmark index. The management was awarded a performance fee of just 0.4% (half year number, as shown in annual report).
The performance charges had a difference. One is 30 times of the other!
For the case of VP, as performance is measured not against benchmark, management got huge return because they are in a big bull market disregrad of under perform in the sector. Obviously, the structure for VP is too good for the fund house and unfair to investors.
Quite a lot of people like VP, but I believe they are charging too much, I would rather invest in funds with fair incentive structure.
Monday, January 15, 2007
Investment
With strong competition, banks are offering very good terms on buying mutual funds. If taking the value of the gift and cash coupons into account, the loading on mutual funds is only 1.8%. While most portfolio accounts are charging over 1% admin fee per year, the bank's offer is really attractive.
So, today, I bought some funds from CitiBank.
ML Emerging Europe
ML Japan Opp
Temp Mutual European
Now, my portfolio looks like :
So, today, I bought some funds from CitiBank.
ML Emerging Europe
ML Japan Opp
Temp Mutual European
Now, my portfolio looks like :
Monday, January 01, 2007
2006 review
In 2006, my investment return is satisfactory, yet I am not too satisfied with the correlation matrix between my holdings. A perfect portfolio is yet to find. Most of the time I were not fully invested.
Good things :
The investment in China H-share, ASEAN, eastern europe, BRIC, emerging market and gold got considerable return.
The timming to sell Japan, India and emerging market funds was perfect, right before the crash. The decision based on phase transition statistics looks good.
The buying of fund at July was at right timing too.
Bad things:
Investment in Japan turned out to be a bad idea.
The selling was not accurately executed by Swiss Privilege. Also, investment advice they made was not good. At last, I terminated their service.
The selling of H-Share seems to be too early. I missed half of the profit.
Good things :
The investment in China H-share, ASEAN, eastern europe, BRIC, emerging market and gold got considerable return.
The timming to sell Japan, India and emerging market funds was perfect, right before the crash. The decision based on phase transition statistics looks good.
The buying of fund at July was at right timing too.
Bad things:
Investment in Japan turned out to be a bad idea.
The selling was not accurately executed by Swiss Privilege. Also, investment advice they made was not good. At last, I terminated their service.
The selling of H-Share seems to be too early. I missed half of the profit.
