Small cap actively managed vs. ignoring small-cap?
Posted: Sun Oct 12, 2003 9:45 am
In the UK market and indeed in Europe, there is not to my knowledge a way to index small-cap equities. Indeed, there still isn't a way to index mid-cap but a UK ETF is coming out to solve that one.
So I'm wondering. Do you buy the best actively managed small-cap fund or do you just ignore the asset class altogether? A small-cap fund has a 5.25% load and 1.76% fees per year approx.
Part of the answer may hinge on an investment timeline from age 35 to age 85, 50 years, and whether any actively managed fund makes sense to a buy & hold investor in such a scenario. The fund managers will have to change during that timeline, perhaps several times over vs. an index that uses a methodology instead of a star manager (though clearly managing index funds is a skill all its own). Do any actively managed funds make sense for a long term investor?
Workarounds could include overweighting US small-cap to balance out a large-cap overweighting in UK, European and other locales generally invested via a market-cap weighted index fund which captures much more of large than mid or small cap a la Wilshire 5000.
Thoughts?
Petey
So I'm wondering. Do you buy the best actively managed small-cap fund or do you just ignore the asset class altogether? A small-cap fund has a 5.25% load and 1.76% fees per year approx.
Part of the answer may hinge on an investment timeline from age 35 to age 85, 50 years, and whether any actively managed fund makes sense to a buy & hold investor in such a scenario. The fund managers will have to change during that timeline, perhaps several times over vs. an index that uses a methodology instead of a star manager (though clearly managing index funds is a skill all its own). Do any actively managed funds make sense for a long term investor?
Workarounds could include overweighting US small-cap to balance out a large-cap overweighting in UK, European and other locales generally invested via a market-cap weighted index fund which captures much more of large than mid or small cap a la Wilshire 5000.
Thoughts?
Petey