general Vivian | 25 Oct 2010 05:26 am

Pensions ?Getting Better Performance For A Comfortable Retirement

If you take the fact that the bulk of investment managers cannot get into double figures on a compound growth basis over five years and very few can out perform the stock index, then it is obvious you have to be careful with your fund selection.

This article is all about getting better pensions performance and will help you separate out the winning funds and asset managers from the losing ones.

Have you ever seen a fund advertised by a major asset manager that losses?

We have never seen one, yet the bulk of funds don抰 do well, so what抯 going on? Let抯 find out.

Selective track records

The pensions and mutual funds industry is sales driven so when a fund does not perform it is conveniently merged into another fund or not promoted. Furthermore, many companies simply start off funds with small amounts of money and then pick the best one to promote.

It抯 all selective and many investors simply don抰 question the figures and believe the sales patter of the advisor or the glossy brochure and then wonder why they end up disappointed!

The best you can expect.

If the bulk of funds cannot beat the share indexes the best thing for share investors to do is to simply buy index tracking funds.

With their low fees they are the best bet, but if you think about it, double digit performance figures are about all you can hope for over a 5 year period.

When you take into account inflation this is hardly great growth.

Alternatives to target 30% annual growth or more

You can however make bigger returns by seeking out managers that are innovative and rely on performance based fees.

There are many managers who do this.

They may deal in alternative investments such as futures, FOREX or commodities or simply shares and equities. The aim though is to seek out an asset manger that has the following:

Low fees based on performance

Wouldn抰 you rather know that if your investment manager is not making money for you he is not making money for himself?

Of course, this does not guarantee performance, but at least they have confidence in their ability and this can give better long term returns.

Funds under management promoted are representative

As we have seen one of the tricks of the major companies is merge funds, drop funds and launch new funds, so that they always have a attractive product for the sales force.

Many asset managers though, will give you a performance that is representative of ALL funds under management and this gives true representation of their management skills.

The fact is, there are a lot of hungry small managers out there, it抯 just a question of doing some research.

Past performance is no guarantee of future results

Or maybe it is.

You know the big mutual funds will not do well!

A bit flippant, but you can see what we mean if you look at 5 year holding periods and performance figures for the major asset managers as a group.

If you are looking to invest in mutual funds then tracking the index looks the best bet.

Most asset managers don抰 out perform it anyway and you get lower fees on tracking funds.

Final words

You can also diversify and look for higher gains look for the smaller innovative managers.

They don抰 tend to have huge sales budgets and rely on performance and are prepared to demonstrate they have confidence by earning fees in this way.

Seek them out their there and you may be glad you did.

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