The amount of evidence stacking up that hedge funds, mutual funds and even private equity do not provide value for their investors is just staggering.
The latest figures reported in the FT showed that 70% of the profits of private equity had been gobbled up by the managers rather than the investors. While there are certainly signs that the public’s tolerance of excessive fees and executive pay is falling, the likelihood of significant structural change in the finance industry is still remote.
Given such a backdrop the probability remains that investors in funds will on average continue to underperform their benchmarks. So what is an investor to do?
We still believe that individuals who have the time and discipline to do their own research and think outside the box should look to invest the equity portion of their own funds directly in the stock market. We appreciate that not every investor has the interest or inclination to do this but a few more might be likely to if they seriously considered how compromised the alternative is.
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