New York Discovers Wall Street Charges Fees
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New York Discovers Wall Street Charges Fees
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Re: New York Discovers Wall Street Charges Fees
#2> In a competitive market for investment performance, managers should charge fees equal to their outperformance.
Then what's the value in a fund manager instead of a simple algorithm that follows the market? Would you hire an employee and pay them the entirety of the value they generate for your business?
What a preposterous argument.
Re: New York Discovers Wall Street Charges Fees
#3TL;DR:
"So for instance in U.S. equities the funds got annual returns of 8.24 percent for 10 years, versus annual fees for U.S. equities of about 0.08 percent. So the funds got 99 percent of the returns on their investment, and the managers got 1 percent of those returns. Again, paying managers 1 percent of the returns they generate does not seem particularly egregious to me, though I suppose there's an argument the other way."
"None of this seems like a blanket reason to condemn "Wall Street," but, you know, politicians gotta politick. My takeaways are something like:
1. New York pension funds' performance is fine.
2. They pay fees that, over all, are quite low.
3. Their alternative investments seem to somewhat outperform public-market benchmarks, though maybe not as much as they'd like."
Re: New York Discovers Wall Street Charges Fees
#4> In a competitive market for investment performance, managers should charge fees equal to their outperformance. Then what's the value in a fund manager instead of a simple algorithm that follows the market? Would you hire an employee and pay them the entirety of the value they generate for your business? What a preposterous argument.
>Then what's the value in a fund manager instead of a simple algorithm that follows the market?
Indeed.
Re: New York Discovers Wall Street Charges Fees
#5> In a competitive market for investment performance, managers should charge fees equal to their outperformance. Then what's the value in a fund manager instead of a simple algorithm that follows the market? Would you hire an employee and pay them the entirety of the value they generate for your business? What a preposterous argument.
It's difficult to follow a market without losing money. I tried once, which was enough to learn that much.
The market generally has been growing for a long time, with 2008 being a notable exception. If you've been growing money at market pace, then historically you've been doing pretty well.
Re: New York Discovers Wall Street Charges Fees
#6> In a competitive market for investment performance, managers should charge fees equal to their outperformance. Then what's the value in a fund manager instead of a simple algorithm that follows the market? Would you hire an employee and pay them the entirety of the value they generate for your business? What a preposterous argument.
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Re: New York Discovers Wall Street Charges Fees
#7The whole article is premised on the idea that Vanguard's fee is low at 0.17%. But is it really? In a free competitive market fees for algorithmic or mechanical money management would probably be a small flat fee. Vanguard's costs are not proportional to the amount of money under management.
Re: New York Discovers Wall Street Charges Fees
#8> In a competitive market for investment performance, managers should charge fees equal to their outperformance. Then what's the value in a fund manager instead of a simple algorithm that follows the market? Would you hire an employee and pay them the entirety of the value they generate for your business? What a preposterous argument.
A lot of people value being able to hold a human responsible.
Re: New York Discovers Wall Street Charges Fees
#9> In a competitive market for investment performance, managers should charge fees equal to their outperformance. Then what's the value in a fund manager instead of a simple algorithm that follows the market? Would you hire an employee and pay them the entirety of the value they generate for your business? What a preposterous argument.
The value is that it's actually quite difficult to follow the market at such huge scale. If you're investing $100 billion and manage to mirror returns of the overall market, you deserve a good commission.
Re: New York Discovers Wall Street Charges Fees
#10> In a competitive market for investment performance, managers should charge fees equal to their outperformance. Then what's the value in a fund manager instead of a simple algorithm that follows the market? Would you hire an employee and pay them the entirety of the value they generate for your business? What a preposterous argument.
From a link in the article:
"
By Matt Levine
Here is a simple model for hedge fund fees:
1. There are some people who can reliably generate alpha -- returns in excess of the market return -- but those people are rare.
2. It is somewhat difficult to tell who those people are; in particular, at any given time, there are more people who look like they can generate alpha than who actually can.
3. If you are one of the people who can generate alpha, you should charge a fee for your services that is equal to the alpha that you generate.
4. If you are not one of those people, you should charge a fee equal to the alpha that those people generate, because then investors might think that you're one of them. "