The study shows the lack of ability is particularly acute where it is needed most: in timing the stock market, where returns are more volatile but generally higher than in bonds. It is a worrying finding given that the only real reason to buy such funds is the asset-changing ability of the managers. Correct choice of asset allocation is said to account for 90% of returns.
“The managers were not very good at getting out of other asset classes and into equities,” says the lead researcher on the project, Prof. Andrew Clare, a director at the Center for Asset Management Research at Cass.
How bad is it?