Sober Look posted a good story yesterday on the outflows from mutual funds (see details below). This is one of the tidal wave trend changes in the investment business. Mutual funds are a dinosaur product. The higher fees, reduced tax efficiency, lack of liquidity, and weak performance continues to hurt the industry. And this is only just beginning. There’s still $24 trillion in global mutual funds just waiting to find a new home. This tidal wave of money will flow out of mutual funds and into ETFs and other more client friendly products and approaches in the coming decades.
Next up – investors will realize most hedge funds are largely the same thing (with higher fee structures). But that trend change might take a few more decades of underperformance and data…..Here’s more via Sober Look:
“2012 was another rough year for equity mutual funds business. In spite of relatively strong stock market performance, retail investors continued to pull their money out. This trend has been in place for quite some time (see discussion), but has accelerated this year. The outflows from US equity mutual funds were roughly $154bn this year.”
Source: ISI Group
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.