PHYSICS 102 Lecture Notes - Lecture 1: Sicav, Modern Portfolio Theory, Momentum Investing
Document Summary
Lecture mutual funds - dr. roger otten: abp: investment advisor (dutch pension fund) Helps choosing between active and passive (index) investing. Transaction cost included in active management: direct transaction cots, governance cost, monitoring managers (is there actually outperformance?) Pooled money from individual investors economies of scale, diversification. Fee charged to manage fund (professional management?) First fund set up in netherlands 1774 (called unity creates strength) Typically following an index (passive) cheaper. Now about 20% of total mutual fund market and growing rapidly. Total expense ratio (ter: incentives for investor to stay in fund and pay ter. All 3 together: total shareholder costs (tsc) Transaction costs are about 1. 44% per year (edelen, 2013) To break-even a fund needs to outperform by (ter+t-cost) If ter around 1. 5%: you pay in total around 3% per year before any return major impact with stocks having on average 7% return over last years.
