Last week it was in the news that out of 10,300 public investment funds in the US, there are more than 5,900 where the portfolio manager owns no shares in the fund they manage.
In other words, 60% of managers have no direct stake in the performance of their funds.
This is clearly not ideal. It may be part of the reason why 90% of all funds underperform their indices over 10-15 year time periods.
Not surprisingly, research has found that when managers are incentivised by performance, results improve.
On eToro, the good news is that every Popular Investor has a stake in their portfolios, as they are investing their own money.
The majority of my net worth, and practically all of my liquid net worth, is invested in my strategy. That’s because I believe in the strategy and because the track record of the strategy supports that belief.
Many sophisticated investors invest in index funds because of their low fees. These investors sleep well knowing that they will, over time, outperform 90% of active funds.
Those of us who want to be in the outperforming 10%, though, can be nimble and take advantage of changes in expected returns across geographies, investing styles and asset classes.
I believe index investing, while a good option for many, is not necessarily the best option for investors in 2023. There are significant differences in the prices of different investing styles at the moment (in particular, between Growth and Value stocks) that investors can take advantage of. A good strategy taking advantage of such dislocations should improve the chances of outperforming the index to above 50%.
Eni and Societe Generale were sold, Intesa Sanpaolo and Caixabank bought.