Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Tuesday, 4 August 2015

ETF Funds > Hedge Funds

14:00 Posted by cheez 2 comments
ETF Funds are taking over Hedge Funds as published by 'The Economist' magazine.
The link to 'The Economist' article is HERE.
Link: Benefits of ETFs
Link: ETF Investing Strategies
Link: How ETFs are Changing the World

ETF Funds currently have more assets under management than Hedge Funds.

Difference ETF Funds Hedge Funds
Asset Under Management $2.971 Trillion $2.969 Trillion
Fees Charged Usually less than 1% 2% annual charge + 15%-20% performance fee
Targets Average retail investors Wealthy Individuals & Institutions
Invests in Stocks in an Index the Fund is tracking
(Eg; S&P500), exact replicate with small errors
A wide range of instruments like stocks, bonds, derivatives, futures, etc
Investment Objective Tracks the market, give investors market returns in minimal fees Aim to provide positive returns irregardless of market movements

Over the long-term, it is shown that ETF Funds that tracks an Index tend to perform better than Hedge Funds, particularly after the fees for both respective funds are deducted from the returns.

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2 comments:

  1. Hi Cheez! An interesting (amazing growth rate) but ultimately, meaningless statistic (sorry!) unless the breakdown of ETFs is given. ETFs are no less destructive than a hedge fund. An ETF can be leveraged, synthetic or inversed. An ETF can be shorted. An ETF can track almost anything you want - there is a Bitcoin ETF. Index Investing ETF can even be "enhanced" - the irony! My opinion is that an ETF is nothing more than a tool - countless people gambled and speculated with them.

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    Replies
    1. Hi Turtle Investor,

      I agree that this statistics isn't exactly meaningful nor useful.
      But it shows that ETFs are gaining traction against other investment instruments/vehicles.
      The very very very indepth analysis of ETF industry and like how much funds goes into each category is very much beyond the scope of this post.
      We aimed to let investors know and understand the basic and normal ETFs better.
      This blog is meant for the average mom & pop investors, so we post simple, actionable items.
      ETFs that needs more studying like inversed etc, we would recommend our readers if they are interested to read up on their own and if they would like to, they can post questions to us and we will find the answers for them.

      Thank you

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