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Active funds beat trackers, says HL

Actively managed funds are better value for money than index-hugging funds in both bear and bull markets, according to research by Hargreaves Lansdown.

HL compared the annual compound growth rate of funds in the all companies sector over one, three, five and 10 years with the return from the FTSE All-Share index.

It then broke down this return – positive or negative – to determine the outperformance or underperformance for each 0.1 per cent of the annual management charge.

The results reveal that active funds outperform trackers in every timeframe from one to 10 years. Over three years, for example, trackers underperformed by -0.04 per cent on average while active funds outperformed by 0.03 per cent.

Over five years, the gap is even wider, as active funds outperformed by 0.02 per cent while trackers underperformed by -0.08 per cent.

Only over 10 years did active funds underperform – returning -0.05 per cent – although they still outperformed passive funds, which returned -0.08 per cent.

The research reveals the consistency of the top-performing funds. Over 10 and five years, GAM&#39s diversified fund is the best-performing in the sector in relation to its AMC while over three years it is the second best. The special situations funds of Fidelity and Rathbone have also displayed similar consistency, featuring in the top four best-performing funds over 10, five and three years.

HL investment manager Ben Yearsley says: “Over the longer term, with quality fund managers, it is worth paying for active management – you do get better value for money compared to trackers.”

Virgin Money communications manager Erica Bell says: “For most, choosing an active fund is still something of a lottery. We maintain that an index tracker should still form the core of most investors&#39 portfolios.”


Buy to let viable alternative to pensions says UCB

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Axa extra income fund evolves offshore

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Housing supply critical to stability – CML

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Franchise is given go-ahead for VAT-free fees

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Cricket - thumbnail

England vs Australia: pensions

Well, the cricket season is here, and England and Australia are stepping up to the wicket. Although we compete with each other in the sporting world, when it comes to pensions, Australia’s pension programme is held up as a model for our auto-enrolment initiative. Auto-enrolment was introduced because people weren’t saving enough into their pensions, and it is still early days but signs are positive. However, in Australia, saving into a pension is compulsory, and in fact employers are the ones who have to pay in. Employees in Australia can make additional contributions into their pensions, but they don’t have to. Should the onus be on the employer or employee to save? Well in the UK we think it’s both, but to get ‘adequate’ savings for retirement it’s the employee who has to pay more in.


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