Tags: banks | mutual | funds | Goldman

NYT: Big Banks' Mutual Funds Attract Major Money ... and Underperform

By    |   Tuesday, 14 April 2015 06:20 AM

Mutual funds are turning into a nice cash cow for big banks, who have been able to draw billions of dollars from their customers for the funds.

But it's not working out quite so well for the customers.

A majority of the funds sponsored by each of the four largest banks in the fund business — Goldman Sachs, Morgan Stanley, JPMorgan Chase and Wells Fargo — have underperformed their benchmarks during the past decade, according to a Morningstar analysis prepared for The New York Times.

And that list excludes funds shuttered for poor performance.

"It's a good business for them [the banks,] but that doesn't mean it is a good investment," Larry Swedroe, director of research at Buckingham Asset Management, told The Times.

At Goldman, just 12 percent of its mutual funds have outperformed their benchmarks during the past 10 years, and 35 percent during the last five years.

"We do not consider their overall long-term performance to be a success any way you look at it,"
Laura Lallos, Morningstar's analyst of Goldman funds, told The Times.

However, Goldman's fund drew $73 billion of new money from investors in 2014, which increased the revenues in the investment management division by 11 percent from the previous year.

Elsewhere on the investment front, all of us will have both successes and failures as we invest in financial markets. But it's the lessons we learn from each that will determine the ultimate success of our investing.

It's always useful to learn how this process plays out with star investors, and Jeffrey Gundlach, CEO of DoubleLine Capital, shared his experiences with The Wall Street Journal.

As for the success, Gundlach began buying debt investments in early 2008 when bad news in the credit markets had pushed them down to 65 cents on the dollar. He bought even though he realized prices might keep dropping, which they did.

"If fundamental value is compelling, you should keep buying," Gundlach told The Journal. "It's ok to take short-term losses." DoubleLine ultimately scored profits of $20 billion from the strategy.

The lesson: "Identifiable problems aren't a reason to stay away from an investment, they're a reason to look," Gundlach said. "The whole trick to investing is identifying when problems are already discounted in prices."

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Mutual funds are turning into a nice cash cow for big banks, which have been able to draw billions of dollars from their customers for the funds.
banks, mutual, funds, Goldman
376
2015-20-14
Tuesday, 14 April 2015 06:20 AM
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