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Tracker funds, like Internet stocks are becoming the rage and not
surprising when their fore-runners, the active funds, have
consistently under-performed their benchmark indices. In response to
growing demand, netISA has decided to launch a new sister website http://www.trackerfunds.com.
So what’s all the fuss about tracker funds and why are they
becoming favourites with investors?
In the US, they have already taken a strong hold of the Mutual Fund
Industry. According to Wall Street Journal, 38% of net new sales of
Mutual Funds in the first 8 months of 1999 went to tracker funds. And
the size of the tracker fund industry in the US is enormous compared
with the embryonic UK tracker market. One of Vanguard’s Index funds
alone is valued at more than the whole of the UK tracker unit trusts.
But the trackers are not new to the UK. According to William M
Mercer, specialist pensions consultants, tracker funds now account for
22% of pensions funds under management - up from 16% on the 1997
figure.
So what do the experts have to say about trackers? Not
surprisingly, the established investment management community are not
great fans of trackers. For them, trackers are anathema because they
challenge the very core of their business. These are founded on the
belief that if you pay fund managers enough they will do better than a
3 year old with a pin. So do they?
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No they don’t. According to Standard & Poor’s
Micropal, 98%
of the actively managed funds failed to beat the Index not just in
1998 but in previous years too. Click
here for more details.
Even one of the most famous investment gurus, Warren
Buffett, had
this to say about trackers:
"Most investors, both institutional and individual,
will find that the best way to own common stocks is through an
index fund that charges minimal fees. Those following this
path are sure to beat the net results (after fees and
expenses) delivered by the great majority of investment
professionals."
Trackerfunds’ website is therefore set for an exciting time. To
mark the start we are offering online, a new and unique tracker fund
to match the performance of a new index, the FTSE
techMARK Index fund. And it has got off to a
cracking start. With netISA’s FTSE 100 tracker fund, we thought its
perfomance since we launched in April 1997, was good. Offer to bid
price +52.75%. But even that pales into insignificance next to the
techMARK Index fund. After only 5 weeks, the offer to bid price
performance is already up 38.4% as at 17th December 1999%.
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