Herd instincts

Article Abstract:

Tracker funds offer low charges and performance in line with the stock market, which has tended to perform well. Fund managers have to select an index, which tends to be the All-Share or the FTSE-100. They can seek to repolicate indexes fully, or use stratified sampling or optimisation. Implementation is also important and includes cashflow management, monitoring and trading. Trackers can offer lower charges for similar performance compared with cautious active funds, so active funds will have to become more agressive in order to show that they are different.

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A roller coaster rise for trackers

Article Abstract:

Index tracking funds have performed well until financial markets hit a period of instability in fall 1998, when active funds had advantages. Supporters of index funds argue that active funds can move into cash, which cannot bring long term gains. Index trackers are badly hit by long bear markets when the best way to avoid losses is to move into bonds, which index trackers cannot do. Investors in active funds have to trust that the manager is taking the right decisions, and index trackers do offer the advantage of low costs.

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Right side of the tracks

Article Abstract:

The performance of FTSE index trackers in 2000 and forecasts for 2001 are examined in detail.

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