It’s the antithesis of long term investing to be invested in equity markets with unguaranteed capital.
A significant amount of returns occurs during the extremes of volatility that mark the major price lows and highs.
What better hindrance to long term compounded returns could there be than to shoot yourself in the foot by allowing your “investors” to withdraw funds en masse due to a market meltdown, in the process causing you, at the time when you most want to be buying, to be converted into a forced seller!
As we know, most actives underperform after fees so even a small additional handicap is going to make it unlikely they’ll beat their indices.
Generally, I’d say it’s only the ones that restrict intakes to sophisticated and wholesale investors that avert this issue because they tend to have clients who can stomach market capitulations (presumably and from what I’ve seen).
So a lot of the these open funds turn out to be a false economy; you can have your NTA but the catch is that that NTA is probably going to be materially lower due to the factor above (and by the way, if they were listed, they’d be also more likely to trade at a discount as well due to the poorer performance).
Also, did you see WAM is launching an LIC LIC (an LIC that invests in LICs that are trading at a discount)?
I wonder whether they’ll be buying shares of VG1 or VG8?!
And will be interesting to see whether they value the LICs in which they invest using a pre or post tax metric (and then even more interestingly how they report their own metrics)
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