FILE - In this March 22, 2018, file photo traders work on the floor of the New York Stock Exchange before the closing bell. After a years-long stretch where most mutual funds and exchange-traded funds powered to quarter after quarter of gains, investors are rediscovering the pain of volatility. The vast majority of funds are on track to close the first quarter with losses after a rocky last few weeks wiped out what had been the best start to a year for U.S. stocks in decades. (AP Photo/Richard Drew, File)
Traders work on the floor of the New York Stock Exchange before the closing bell. After a years-long stretch where most mutual funds and exchange-traded funds powered to quarter after quarter of gainsShow more

Ultimately no one is winning the active fund management game



Institutions do better than individuals at active fund management, but given that both come out losers the underlying message is that picking stocks and bonds is a game neither group should play.

The vast majority of all mutual fund and institutional accounts failed to keep pace with their benchmarks over the past decade, according to a new report from S&P Dow Jones Indices examining the impact of fees.

And while institutional accounts, owned by large and deep-pocketed investors with formal selection processes, usually performed better than their mutual fund peers, the difference is almost always not because their managers are better. Instead, institutions are better at negotiating lower fees.

In other words, and we have learned this before, active fund management is a fool’s errand. Institutional accounts did better, but it was all a little like the old joke in which the man frequents a restaurant because “the food is terrible, but the portions are large".

Unless you are an active mutual fund investor, in which case your terrible food is a bit more expensive.

The report examined the impact of fees on mutual fund and institutional account performance over the past decade, using data from the University of Chicago and eVestment Alliance.

“Across various categories within the domestic equity space, the overwhelming majority of active managers, both retail and institutional, lagged their respective benchmarks,” according to the report.

“Overall findings suggest that on a gross- or net-of-fees basis, the U.S. equity space poses meaningful challenges for active managers to overcome.”

"Meaningful challenge" is somewhere between kind and a massive understatement.

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Among large-cap equity mandates benchmarked to the S&P 500, 85 per cent of mutual funds underperformed the market over 10 years after fees are deducted, as well as 80 per cent of institutional accounts. Looking at the same category gross of fees mutual funds bested institutions slightly, in that only 68 per cent of them failed to match market return over 10 years, as compared to 69 per cent of institutional accounts.

This illustrates both that institutions are better positioned to drive a hard bargain, but for a service which is effectively giving them what they deserve good and hard.

Wait, I can almost hear the active managers say, “you are cherry-picking data”.

“If only,” I can only ruefully reply.

Net of fees 95 per cent of large-cap growth mutual funds and 90 per cent of institutional accounts lagged. The same statistics for mid-cap core funds were 98 and 95 per cent, respectively. My sense of fairness impels me to tell you that in only one of the 17 categories of domestic equities did active mutual funds outperform, and that is large-cap value funds, where only 47 per cent failed to keep pace with their benchmark, gross of fees. Take fees into account, of course, and that number grows to 64 per cent.

There was not a single domestic equity category over the past 10 years in which investors would have been better off holding the typical mutual fund or institutional account. Not one.

But wait, our active manager friend chimes in, “domestic equity is a commodity, look at international and emerging markets, that’s where we add value". OK, let’s.

International small-cap equity is as close as it gets, but here too, while 48 and 50 per cent of mutual and institutional accounts beat their benchmark over a decade, this is only gross of fees. More than 60 per cent in both cases underperform when fees are counted. As for emerging markets funds, 86 per cent of mutual funds don’t match the index over our 10 years, nor do 79 per cent of institutional accounts.

In fixed income, comparisons between mutual funds and institutional accounts can’t be made as easily on an apples-to-apples basis, but the overall message is the same. While many more fixed income managers beat their index on a gross basis, the majority still do not when you take into account fees.

For example, a creditable 48 per cent of emerging market debt mutual funds lag their benchmark before fees, but that rises to a regrettable 76 per cent after fees. The best the industry can do in fixed income mutual funds is in investment-grade intermediate funds, where only 59 per cent lag. Not much of an advertisement.

Institutions paid a good bit less in fees for their fixed income active management but also got the same market-lagging performance.

While passive investing may possibly be, as Sanford Bernstein analysts put it recently “worse than Marxism,” active management, as shown in the S&P report, is socialism for fund managers.

James Saft is a columnist for Reuters

Veil (Object Lessons)
Rafia Zakaria
​​​​​​​Bloomsbury Academic

Company Profile

Name: HyveGeo
Started: 2023
Founders: Abdulaziz bin Redha, Dr Samsurin Welch, Eva Morales and Dr Harjit Singh
Based: Cambridge and Dubai
Number of employees: 8
Industry: Sustainability & Environment
Funding: $200,000 plus undisclosed grant
Investors: Venture capital and government

'O'

Author: Zeina Hashem Beck
Pages: 112
Publisher: Penguin Books
Available: Now

Tuesday results:

  • Singapore bt Malaysia by 29 runs
  • UAE bt Oman by 13 runs
  • Hong Kong bt Nepal by 3 wickets

Final:
Thursday, UAE v Hong Kong

COMPANY PROFILE

Company name: Almouneer
Started: 2017
Founders: Dr Noha Khater and Rania Kadry
Based: Egypt
Number of staff: 120
Investment: Bootstrapped, with support from Insead and Egyptian government, seed round of
$3.6 million led by Global Ventures

UAE SQUAD

Muhammad Waseem (captain), Aayan Khan, Aryan Lakra, Ashwanth Valthapa, Asif Khan, Aryansh Sharma, CP Rizwaan, Hazrat Billal, Junaid Siddique, Karthik Meiyappan, Rohan Mustafa, Vriitya Aravind, Zahoor Khan and Zawar Farid.

UAE v Gibraltar

What: International friendly

When: 7pm kick off

Where: Rugby Park, Dubai Sports City

Admission: Free

Online: The match will be broadcast live on Dubai Exiles’ Facebook page

UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), Esekaia Dranibota (Harlequins), Matt Mills (Exiles), Jaen Botes (Exiles), Kristian Stinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), Emosi Vacanau (Harlequins), Niko Volavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), Thinus Steyn (Exiles)

Three ways to limit your social media use

Clinical psychologist, Dr Saliha Afridi at The Lighthouse Arabia suggests three easy things you can do every day to cut back on the time you spend online.

1. Put the social media app in a folder on the second or third screen of your phone so it has to remain a conscious decision to open, rather than something your fingers gravitate towards without consideration.

2. Schedule a time to use social media instead of consistently throughout the day. I recommend setting aside certain times of the day or week when you upload pictures or share information. 

3. Take a mental snapshot rather than a photo on your phone. Instead of sharing it with your social world, try to absorb the moment, connect with your feeling, experience the moment with all five of your senses. You will have a memory of that moment more vividly and for far longer than if you take a picture of it.

Sui Dhaaga: Made in India

Director: Sharat Katariya

Starring: Varun Dhawan, Anushka Sharma, Raghubir Yadav

3.5/5

ROUTE TO TITLE

Round 1: Beat Leolia Jeanjean 6-1, 6-2
Round 2: Beat Naomi Osaka 7-6, 1-6, 7-5
Round 3: Beat Marie Bouzkova 6-4, 6-2
Round 4: Beat Anastasia Potapova 6-0, 6-0
Quarter-final: Beat Marketa Vondrousova 6-0, 6-2
Semi-final: Beat Coco Gauff 6-2, 6-4
Final: Beat Jasmine Paolini 6-2, 6-2

David Haye record

Total fights: 32
Wins: 28
Wins by KO: 26
Losses: 4

Sarfira

Director: Sudha Kongara Prasad

Starring: Akshay Kumar, Radhika Madan, Paresh Rawal

Rating: 2/5

Kill

Director: Nikhil Nagesh Bhat

Starring: Lakshya, Tanya Maniktala, Ashish Vidyarthi, Harsh Chhaya, Raghav Juyal

Rating: 4.5/5

A QUIET PLACE

Starring: Lupita Nyong'o, Joseph Quinn, Djimon Hounsou

Director: Michael Sarnoski

Rating: 4/5

Company profile

Company: Splintr

Started: May 2019

Founders: Mohammad AlMheiri and Badr AlBadr

Based: Dubai and Riyadh

Sector: payments / FinTech

Size: 10 employees

Initial investment: undisclosed seven-figure sum / pre-seed

Stage: seed

Investors: angel investors

The specs

Engine: 4-cylinder 2.0L TSI
Transmission: Dual clutch 7-speed
Power: 320HP / 235kW
Torque: 400Nm
Price: from $49,709
On sale: now

COMPANY PROFILE

Name: Kinetic 7
Started: 2018
Founder: Rick Parish
Based: Abu Dhabi, UAE
Industry: Clean cooking
Funding: $10 million
Investors: Self-funded

COMPANY PROFILE

Company name: HyperPay

Started: 2014

Founder: Muhannad Ebwini

Based: Riyadh, Saudi Arabia

Industry: FinTech

Funding size: $55m

Investors: AB Ventures, Amwal Capital, INet, Mada VC, Mastercard, SVC

KEY DATES IN AMAZON'S HISTORY

July 5, 1994: Jeff Bezos founds Cadabra Inc, which would later be renamed to Amazon.com, because his lawyer misheard the name as 'cadaver'. In its earliest days, the bookstore operated out of a rented garage in Bellevue, Washington

July 16, 1995: Amazon formally opens as an online bookseller. Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought becomes the first item sold on Amazon

1997: Amazon goes public at $18 a share, which has grown about 1,000 per cent at present. Its highest closing price was $197.85 on June 27, 2024

1998: Amazon acquires IMDb, its first major acquisition. It also starts selling CDs and DVDs

2000: Amazon Marketplace opens, allowing people to sell items on the website

2002: Amazon forms what would become Amazon Web Services, opening the Amazon.com platform to all developers. The cloud unit would follow in 2006

2003: Amazon turns in an annual profit of $75 million, the first time it ended a year in the black

2005: Amazon Prime is introduced, its first-ever subscription service that offered US customers free two-day shipping for $79 a year

2006: Amazon Unbox is unveiled, the company's video service that would later morph into Amazon Instant Video and, ultimately, Amazon Video

2007: Amazon's first hardware product, the Kindle e-reader, is introduced; the Fire TV and Fire Phone would come in 2014. Grocery service Amazon Fresh is also started

2009: Amazon introduces Amazon Basics, its in-house label for a variety of products

2010: The foundations for Amazon Studios were laid. Its first original streaming content debuted in 2013

2011: The Amazon Appstore for Google's Android is launched. It is still unavailable on Apple's iOS

2014: The Amazon Echo is launched, a speaker that acts as a personal digital assistant powered by Alexa

2017: Amazon acquires Whole Foods for $13.7 billion, its biggest acquisition

2018: Amazon's market cap briefly crosses the $1 trillion mark, making it, at the time, only the third company to achieve that milestone

Did you know?

Brunch has been around, is some form or another, for more than a century. The word was first mentioned in print in an 1895 edition of Hunter’s Weekly, after making the rounds among university students in Britain. The article, entitled Brunch: A Plea, argued the case for a later, more sociable weekend meal. “By eliminating the need to get up early on Sunday, brunch would make life brighter for Saturday night carousers. It would promote human happiness in other ways as well,” the piece read. “It is talk-compelling. It puts you in a good temper, it makes you satisfied with yourself and your fellow beings, it sweeps away the worries and cobwebs of the week.” More than 100 years later, author Guy Beringer’s words still ring true, especially in the UAE, where brunches are often used to mark special, sociable occasions.

Naga

Director: Meshal Al Jaser

Starring: Adwa Bader, Yazeed Almajyul, Khalid Bin Shaddad

Rating: 4/5

Profile of Whizkey

Date founded: 04 November 2017

Founders: Abdulaziz AlBlooshi and Harsh Hirani

Based: Dubai, UAE

Number of employees: 10+

Sector: AI, software

Cashflow: Dh2.5 Million+ 

Funding stage: Series A

Porsche Macan T: The Specs

Engine: 2.0-litre 4-cyl turbo 

Power: 265hp from 5,000-6,500rpm 

Torque: 400Nm from 1,800-4,500rpm 

Transmission: 7-speed dual-clutch auto 

Speed: 0-100kph in 6.2sec 

Top speed: 232kph 

Fuel consumption: 10.7L/100km 

On sale: May or June 

Price: From Dh259,900  

The more serious side of specialty coffee

While the taste of beans and freshness of roast is paramount to the specialty coffee scene, so is sustainability and workers’ rights.

The bulk of genuine specialty coffee companies aim to improve on these elements in every stage of production via direct relationships with farmers. For instance, Mokha 1450 on Al Wasl Road strives to work predominantly with women-owned and -operated coffee organisations, including female farmers in the Sabree mountains of Yemen.

Because, as the boutique’s owner, Garfield Kerr, points out: “women represent over 90 per cent of the coffee value chain, but are woefully underrepresented in less than 10 per cent of ownership and management throughout the global coffee industry.”

One of the UAE’s largest suppliers of green (meaning not-yet-roasted) beans, Raw Coffee, is a founding member of the Partnership of Gender Equity, which aims to empower female coffee farmers and harvesters.

Also, globally, many companies have found the perfect way to recycle old coffee grounds: they create the perfect fertile soil in which to grow mushrooms. 

The five pillars of Islam

1. Fasting

2. Prayer

3. Hajj

4. Shahada

5. Zakat

While you're here
The specs

Engine: three three 212.7kWh motors
Power: 1,000bhp
Torque: 15,600Nm
Range: 530km
Price: Dh500,000+ est
On sale: early 2023

Ain Dubai in numbers

126: The length in metres of the legs supporting the structure

1 football pitch: The length of each permanent spoke is longer than a professional soccer pitch

16 A380 Airbuses: The equivalent weight of the wheel rim.

9,000 tonnes: The amount of steel used to construct the project.

5 tonnes: The weight of each permanent spoke that is holding the wheel rim in place

192: The amount of cable wires used to create the wheel. They measure a distance of 2,4000km in total, the equivalent of the distance between Dubai and Cairo.

Herc's Adventures

Developer: Big Ape Productions
Publisher: LucasArts
Console: PlayStation 1 & 5, Sega Saturn
Rating: 4/5

Company Profile

Company name: Hoopla
Date started: March 2023
Founder: Jacqueline Perrottet
Based: Dubai
Number of staff: 10
Investment stage: Pre-seed
Investment required: $500,000


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