Active Share

Why do you invest with “All Star Fund Managers”?
When you’re planning for your future, you need to have a sound investment strategy that gives you confidence that you will eventually have the retirement you want.

The best way to understand this is with a hockey analogy.

Would it be more effective for me to go on the ice and stickhandle & shoot, or for me to pick an NHL superstar to play for me? I learned that it is much more effective to study & hire the top investment managers, than to try to be one. The stock market is much more complex than people think it is.
Our process is hiring the world’s best investors to invest for us. We call them “All Star Fund Managers”. We think this gives our clients the best chance to achieve their goals.

What do you mean by “All Star Fund Manager”?
An All Star Fund Manager is someone that has beaten their index over long periods of time and we are confident that it is because of skill & passion.
Identifying them involves many factors. It’s like hiring a senior executive for a company you own. It is not just picking a fund.
Some characteristics are being experienced, having a focused portfolio, being a bottom-up stock picker, integrity, passion, and have their own money in the fund.

But doesn’t the average mutual fund underperform the index?
We are not investing with an average fund manager. We’re searching for the best of the best. Just like any other field, there are top people with real skill.
The average fund manager underperforms because most are “closet indexers”. What is a closet indexer? A fund manager who keeps their portfolio similar to index. They are not true stock pickers.
Being similar to an index makes it easier to sell your fund to the public and protects the fund manager’s job.

The most in-depth study I’ve seen about indexes and fund managers is from two Yale researchers and is called “Active Share”. You can see on the graph that the more different you are from the index the better you perform. This is because those are the true stock pickers.

The study showed that for fund managers with a high Active Share – the average fund manager beats the index. One of our criteria is that our fund managers must invest very differently from the index.

Aren’t top fund managers expensive?
We look for value for our dollar. We think that looking for the lowest cost is the wrong focus. We focus on quality.

When you buy a mutual fund or a hedge fund, for most people this includes the cost of paying your financial planner for advice. Some low cost investments don’t include paying for advice from your financial planner, so you would have to pay separately for advice.

This means if your fund manager matches or beats the index, then you have paid your financial planner for comprehensive planning and still made as much money as you would with an index investment.

The proof is in the pudding. Everyone at Ed Rempel & Associates invests with the same fund managers that we recommend for our clients.

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