In November, managed portfolios moved closer to marking 2009 as one of the most outstanding years for returns, after an especially difficult opening to the year.
A Kali Capital Markets index, which measures returns of investment portfolios, shows that in November, managed portfolios returned 1.1% in fixed income portfolios, and posted a return of 4% in portfolios that included up to 100% exposure to equities.
The Kali Capital Markets index is based on the returns of seven leading investment houses, which represent 80% of the assets in managed portfolios. Figures are based on reported returns by those firms according to identical asset allocations.
Returns are net of management fees, purchase and sales fees, and tax paid at source. The returns are audited by Kali's investment committee.
Managed portfolios are considered an investment option for the wealthy. For investors with less money available, alternatives are mutual funds and ETFs.
Is there an advantage to managed portfolios? Kali sought to find an answer, and compared returns in portfolios comprising 20% equity and 80% fixed income with mutual funds and ETFs investing with identical allocations. They also compared returns with a benchmark index comprising 80% of the general bond index, and a 20% weighting for the Tel Aviv 100 Index.
Results showed that the returns of the managed portfolios were in between those of ETFs and those of mutual funds, both in rising and falling markets. In 2008, the managed portfolios returned negative 11.5%, while ETFs returned negative 10.5%, and mutual funds returned an average of negative 17.3%.
In a bull market, mutual funds had the highest return, with 27.1%, while managed portfolios returned 26.6%, and ETFs lagged with a 25.7% return. With only one exception, all the investments lagged the benchmark index returns.
It is important to note that mutual funds are subject to investors' emotional swings. In times of panic, mutual funds face large redemptions, and have to sell assets at lower prices to repay investors. In rising markets, investors pile more money into the funds and the situation reverses.
Published by Globes [online], Israel business news - www.globes-online.com - on December 17, 2009
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