16-17 October 1999

The decline of active fund managers

Burton G. Malkiel, author of "A Random Walk Down Wall Street" [available at Tracker Magazine's Financial Bookshop], claims that since he first recommended index-tracking investment 30 years ago, tracker funds have grown considerably more than the typical active general equity fund.

Furthermore, Standard & Poor's Fund Research studied the returns of 80 mutual funds invested in global equities. In recent years, these active funds have been consistently lagging behind those funds that aim to track the indices. More specifically, the average fund underperformed the index by nearly 9 per cent.

It is no longer surprising that many investors are now turning to tracker funds. In an area once dominated by a handful of professionals, the investment market is now flooded with numerous professional management firms all competing against each other as well as the index. Consequently it is getting harder and harder for an investor to pick a winning active fund manager and the safest bet is more often to go with a tracker.