Massive swings in unit trust money – the trend may be your friend

Having chewed the fat with one of their portfolio managers this week, it’s no surprise to see Allan Gray alongside Foord on the top of Morningstar’s table of top performing unit trust houses. He was chirpy despite obvious exhaustion, having stopped in London en route home after two high powered conferences on the US West Coast.

His travel schedule is the kind of bar-raising that money managers are forced into just to stay competitive. That his challenge no longer comes from other humans but from robotic index trackers is a reminder that the Fourth Industrial Revolution is grabbing a hold everywhere.

These “passive” unit trusts are cheaper, simpler and have consistently delivered higher returns than human-managed ones. And the money is starting to flow they way you’d expect. During the three years to the end of August, US index trackers attracted $1.3 trillion in fresh money while investors cashed in $250bn from “actively” managed unit trusts.

Morningstar’s figures also show during the last five years only one in eight active managers beat benchmarks against which they measure themselves. Despite the data, two thirds of US unit trust money is still with active funds. For now. By the way, when last did you compare your unit trust’s return against the index?

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