Consumer road tests managed funds

The Consumers' Institute has done a survey of nearly 450 managed funds and decided that only 16 of them were suitable for investors looking for long-term growth.

The survey, in the July issue of Consumer magazine, is a repeat of one done two years ago.

Consumer created a set of screens then ran them over the database of managed funds research house FundSource to come up with its answers.

Its criteria included: a fund had to be publicly accessible, it had to have been running for three years and have more than $10 million in assets. Entry fees could be no more than 6% and on-going fees had to be expressed as a percentage of assets, and exit fees had to be less than 2%. Also, investment teams for actively managed funds had to have been together for two years, a fund had to be in the top quartile over the past three years and minimum investment could be no more than $2000.

Only 48 of the 448 funds on FundSource's database passed this initial screening test. Of those just 16 were recommended by Consumer.

The process has been criticised by some in the industry, including adviser and actuary Michael Chamberlain. He reckons the process is flawed and the analysis is incomplete. (For more see his Opinion piece in the Features section).

FundSource executive chairman David van Schaardenburg says the survey is not a bad result considering the parameters used.

He says the conditions placed on the article included, keeping it simple, transparency and narrowing down the number of funds to a small universe.

The important question for readers is whether Consumer adequately qualified the article, its process and reliability of the results.

"It's a moot point whether they have," van Schaardenburg says.

"There no one answer about how to invest in a fund," he says. "We don't believe they are saying anything wrong in (the article)."

Another of the criticisms, or concerns raised about the article is that people will take Consumers' advice, after all their conclusion is called " Our Advice" and buy the funds without having a detailed, or thought out plan.

Van Schaardenburg says he doesn't really see Consumer as being "a serious competitor to advisers", despite its reach and influence with its readers.

"(Consumer) can't compete with the advisory side of the industry."

Consumer says it has had good response to the survey. One thing it is disappointed about is that organisations that have their own funds, such as Money Managers and Spicers, wouldn't participate in the story.

Opinion: Consumers' got it wrong...again

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