Investor impatience reflects disaffection with fund managers
Investors used to be told that they must invest for up to 10 years - now we must wonder whether either horizon is long enough.
Have investors become too impatient to make sensible decisions any more?
An IFA friend is constantly telling me that the media, investors and some advisers are too short term in their thinking. Funds are bought and sold too swiftly if they do not give instant returns.
But where do you draw the line between actively managing a portfolio and fiddling too much?
No one wants investments that have gone off the boil to languish but to expect instant and permanent outperformance is simply unrealistic.
Let us take Invesco Perpetual Income. This went through a sticky patch lasting a couple of years.
But last year it outperformed its peer group by more than 10 per cent, according to Morningstar.
That investors have become disillusioned with some funds is beyond dispute. BlackRock UK Alpha fund, once valued at more than £1bn, has since seen net withdrawals of £694m.
Some £187m has gone from the start of this year and £55m in March.
Some financial advisers warned from the start that many investors did not really understand absolute return funds. These redemptions would seem to confirm that.
There is a clear trend for investors to ditch managed funds in favour of trackers – if you can not beat the market you may as well join it.
Some appear to be heading for multi-manager funds, though in most cases this can hardly be on the basis of outperformance.
Of course the investment conditions do not help. In more than 20 years up to 2000 the stock market generally went gradually upwards.
Even the heavy losses from the 1987 crash were recovered by the summer of 1990.
Yet since the technology boom investors have experienced long periods of uncertainty mixed with the odd phase of optimism.
As I write this the FTSE 100 sits at 5447, a level it first hit on 2 November 1988. Investors will have received income since then, but it is hardly inspiring is it?
Investing in the past 12 years has been not unlike the weather this spring – the occasional spell of sunshine has been surrounded by long periods of rain.
In the past three years in particular investors have regularly had to contend with daily volatility that must test the nerve and patience of even the more experienced.
Investors used to be told that they must invest for five years or perhaps 10. Now we must wonder whether either horizon is long enough.
So are investors too impatient? Perhaps, but with good reason.
While they have committed their money they have often been disappointed. Meanwhile those running many of the UK’s biggest companies have walked away with bigger and bigger rewards.
If I were an investor I would be fed up and impatient. In fact I plead guilty on both counts.