Although tracker funds, which aim to replicate the movements of an index, may not be the flavour of ...
Although tracker funds, which aim to replicate the movements of an index, may not be the flavour of the month or indeed of the last few years of plunging equity markets, Chartwell Investment Management has brought out the 3rd edition of the Guide to Tracker Funds.
The guide compares over 50 FTSE 100, FTSE 250, FTSE All Share, European, US, Japanese, Pacific, global and specialist trackers from the two most important perspectives when considering selecting a tracker: its charges and its ability to accurately track its index.
To work out whether a fund is tracking accurately, Chartwell has provided 'differential' figures, or the variation between fund performance and the index it is aiming to track, which should ideally be neither significantly over or under the index.
With this criteria in mind, Chartwell has also identified their preferred tracker funds: Abbey National Stockmarket 100 Tracker, HSBC FTSE 250 Index, M&G Index Tracker, Allianz Dresdner European Index, Legal & General US Index, HSBC Japan Index, L&G Pacific Index and L&G General Global 100.
Research analyst at Chartwell, Ben Willis, said, "It is satisfying to see that the differentials exhibited in the current edition of this guide, when compared to the previous editions, show that the majority of funds have improved their tracking ability."
"However, there are still some 'shockers', with the worst FTSE-100 tracking fund showing a 5-year differential of minus 8.2%. When you consider that over 5 years the FTSE-100 is significantly down, factor in this considerably high tracking error and existing investors into this fund will be feeling extremely disappointed."
Indeed, with 3 years of falling equity markets, trackers chained to slumping indices, cannot be considered as successful as actively managed funds with the potential to buck the trend, unless of course, the value of actively managed funds are dropping by more than the indices.
But Chartwell says that certain people in the industry believe that as the markets are at, or near, their lowest levels, equities appear to be good value and now is an opportune time to invest in a tracker fund to exploit future recovery in the markets.
Although Chartwell is not backing this point of view. Instead, it believes markets will be moving sideways over the medium term and is putting investors' money into actively managed funds.
For copies of the guide call 01225 446 556 or click through the link on the right
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