I’ve never been a big fan of tracker funds. I think this is probably because I see them as being a bit dull, and also they seem to lack the “character” that a traditional fund manager might give to a fund. I guess I also perceived them as being “cheap and cheerful”, funds for those who didn’t really know what to invest in (not that I can really say that I know what I’m doing).
But it seems that they have their place, as they have out-performed actively managed funds over the past four months, according to fund research company Lipper. As they generally have lower investment costs, it means that they don’t have to perform quite as well in order to cover your initial and annual management charges, something that the higher charging actively managed funds suffer from. Costs, whether they be initial charges or on-going management fees, should always be factored in when making any sort of investment
I don’t think this will necessarily make me rush out and invest in a tracker fund though – Lipper states that the top performing tracker fund, in the 12 months up to May 2005, put on a very respectible 19.8%, but the best performance in the same period from an actively managed fund was over 32%.