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New York Discovers Wall Street Charges Fees

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Re: New York Discovers Wall Street Charges Fees

#141

Post by chriogenix »

lelandbatey wrote: post #27
astazangasta wrote: post #24

Earlier quoted context omitted.

Orly? So you're OK with paying an extra 1% above the market rate on your mortgage? Because that's the kind of thing you're talking about. 1% a year will eat quite a lot out of your retirement over 40 years. I.e. 40%.

The fees are 1% on returns not on the "balance" as it where. The total fees as a percent of total invested assets are 0.2% per year.

the fee is not on the return its on the balance. so if you make money, they make money. if you lose money they still make money. mutual fund feeds end up being massive over a long period of time which is why financial advisors do so well if they have a big enough asset base

Re: New York Discovers Wall Street Charges Fees

#142

Post by pbhjpbhj »

Lazare wrote: post #122
pbhjpbhj wrote: post #95

Earlier quoted context omitted.

With that sort of weight of assets surely they can push the market around enough to gain no matter where prices move?

I see you're getting downvoted, but no one is bothering to explain. First, the market in general works in the exact opposite way. You can invest a million dollars a lot of places; with enough luck and skill you'll earn a great return. Keep doing that and soon you'll have, say, 500 million. But 500 million is harder to invest; you might say "stock X is really undervalued; I'm going to go long!", but if stock X has a m…

Thanks for your comment. I didn't ask if an index fund could move the market, I asked if an investor with so much couldn't move the market.

One guy bought 15% of the world's cocoa and now chocolate prices are high and manufacturers are trying to rip off consumers by filling thick plastic packages with more air and less chocolate bar.

If you had control of that sort of money it just seems you could be invisible. The cost of the entire coffee production of the world is only billions, buy any significant percentage and there's going to be companies who'll either pay or collapse?

Re: New York Discovers Wall Street Charges Fees

#143

Post by jcdavis »

wcgortel wrote: post #126
wpietri wrote: post #99

Earlier quoted context omitted.

A point he still believes in. In 2008 he made a million-dollar bet with a highly-paid money manager: http://longbets.org/362/ Seven years into the bet, he's way ahead: http://fortune.com/2015/02/03/berkshires-buffett-adds-to-his... For those interested in the coin-flipping analysis, I strongly recommend "Fooled by Randomness", which is a smart, passionate, and funny examination of how that problem plays out in the in…

You may be interested to read the other guy's take on that bet. One of the more interesting reads on the business of running a hedge fund I've seen. http://blogs.cfainstitute.org/investor/2015/02/12/betting-wi... (Disclosure: I work at CFAI)

The article is bs and reeks of ass-covering (and lots of other folks agree). If S&P 500 was such a bad benchmark, why did he bet $320k on being able to beat it? The other points (interest rates etc) amount to "We couldn't predict the future", which would normally be fine, but not when you are charging 2 & 20 to do so.

Edit: a better response - http://msantoli.tumblr.com/post/110804679383/cry-me-a-river-...

Re: New York Discovers Wall Street Charges Fees

#144

Post by msandford »

Lazare wrote: post #98
defen wrote: post #29

Earlier quoted context omitted.

Ok, so I'll be the guy on the other side of this hypothetical deal. In the scenario he's described, either I get market returns by paying the elite guy to keep his alpha, or I get sub-market returns by paying too much to a guy who isn't actually elite. So, best case scenario I get market returns? Then why not just invest in an index fund?

> So, best case scenario I get market returns? Yes. Note: This is a surprisingly accurate description of reality. Aggregate hedge fund returns are goddamn terrible. > Then why not just invest in an index fund? Well, you should, if you're trying to maximise your expected outcome. Of course, not everyone is trying to do that. In particular, what if you run a pension fund which is currently underfunded, but for politica…

If the guy generating alpha keeps most/all of his above-market alpha, then that means there's none for me to get or keep, right? I can't see how that's attractive at all.

Re: New York Discovers Wall Street Charges Fees

#145

Post by danielweber »

jib wrote: post #82
hkmurakami wrote: post #73

Earlier quoted context omitted.

The article suggests that the fees were comprised of management fees only. This is a common structure for "long only" management funds that limit their exposure to public equities and are under significant restraints in how "creative" they are allowed to be.

But that is even worse, right? That is paying a fixed price for someone to gamble for you. If you look at it objectively, a more sane pricing model would be that you get a discount on the flat fees compared to what you would pay for a non-managed fund, but with a bonus paid on earnings. The value proposition from the fund managers is that they can significantly outperform a non-managed fund. If that is true, then wha…

If you are the New York pension fund, you can shop around for someone to offer that. Unless it totally doesn't make sense.

Re: New York Discovers Wall Street Charges Fees

#146

Post by bengali3 »

lsaferite wrote: post #102
wpietri wrote: post #99

Earlier quoted context omitted.

A point he still believes in. In 2008 he made a million-dollar bet with a highly-paid money manager: http://longbets.org/362/ Seven years into the bet, he's way ahead: http://fortune.com/2015/02/03/berkshires-buffett-adds-to-his... For those interested in the coin-flipping analysis, I strongly recommend "Fooled by Randomness", which is a smart, passionate, and funny examination of how that problem plays out in the in…

It's nice to see them put their money where their mouth is on this one. And it's great to see the $1M is actually up around $1.7M at this point. Hopefully it continues to grow before it gets donated to charity.

I'm guessing the money manager was able to get some new client funds because of his ability to put his money where his mouth is. 'I put my own money in this' is a strong argument. If it gained him $500m in funds at 2% fee, then a 1 mil losing bet is covered by new accounts in year 1.

Re: New York Discovers Wall Street Charges Fees

#147

Post by danielweber »

harmegido wrote: post #66
jevgeni wrote: post #64

Earlier quoted context omitted.

But they aren't buying index funds..?

They should be. There's no way the 5X charge is worth the active management. And yes, I realize that in this 10 year period it was, but that's just variance.

Why is 5X "too much"? That's 5X of a very small amount.

I would happily quintiple my risk of dying from a meteorite strike for $20,000.

Re: New York Discovers Wall Street Charges Fees

#148

Post by danielweber »

harmegido wrote: post #65
anigbrowl wrote: post #18

One easy trick: Express it as a 10-year cost, rather than an annual cost, and it sounds 10 times as big! This is an increasing and pernicious trend in political discourse.

It's funny because the author did a similar trick. Vanguard's fees are 0.17. The pension fund paid ~0.25. That's a small difference because the numbers are small! Actually, that's nearly a 50% upcharge for the fund relative to vanguard.

Given 17 basis points for a passively managed fund, 25 basis points for an actively managed fund is a fucking steal.

Saying "50% more" is completely the wrong way to look at it.

Re: New York Discovers Wall Street Charges Fees

#149

Post by briandear »

Shivetya wrote: post #88
aioprisan wrote: post #3

TL;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…

The issue isn't how much they are being charged, the issue is that far too many public employee unions have large pension deficits and cities, states, and the like, need a bogeyman. Looking for related stories, this pension went from over funded in 99 to underfunded by 2012, to the tune of only having 63% of what is should have. Likely this is just the trial balloon, expect similar articles as the truth about governm…

Money managers are the least of public pensions' problems. Unfunded liabilities are far bigger; it's easy to blame Wall Street rather than the policy makers who continue down the road to insolvency.

Re: New York Discovers Wall Street Charges Fees

#150

Post by lifeisstillgood »

dragontamer wrote: post #117
lifeisstillgood wrote: post #55

Earlier quoted context omitted.

So, and this is a naive question, why on earth does a Vanguard fund charge a percentage for what seems to be very simple administration (sell 1000000 shares in X, buy 100000 shares in Y, make sure VWAP is good). I mean - if I was a trustee of a million fund let alone billion I would expect to know the baseline level of dumbest simplest possible investing process. That approach seem the simplest.

> So, and this is a naive question, why on earth does a Vanguard fund charge a percentage for what seems to be very simple administration (sell 1000000 shares in X, buy 100000 shares in Y, make sure VWAP is good). Because Vanguard's prices are the lowest. Where else are you going to go? The typical fund charges between 1% to 2%. Vanguard charges 0.05% if you qualify for Admiral Shares ($10,000 minimum). Various ETFs…

I suppose my question is better framed as - why is the cost of trading so high? Presumably the stock exchange will charge per transaction, but if I have 100bn invested across 10,000 equities, at a dollar a piece, that's 10M shares. If I make transactions of just 100 stocks per time, that's a whole refresh in 100,000 transactions. Do that 12 times a year at 5 dollars per transaction and I see a mere 6 million cost to look after 100bn in invested funds.

So ... What am I missing. Exchanges all use electronic trading now, Charles Schwann would give me 5 bucks per transaction.

Why does anyone pay percentages?

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