http://www.h-l.co.uk/fund_research/securit...edol/B195JD8.hl

This fund seems to be an excellent idea. It has a lot less volatility than JPM Natural Resources and still gives consistent gains. It covers all kinds of commodity, it is actively managed but basically invests in the commodity direct through ETFS rather than through shares.

Two words: Caveat Emptor.



The launch date of this fund was 26th of July 2006. Under two years in existence and you're calling the virtues of its volatility and consistent returns?



Exactly. I hear warning bells. Firstly there's an outrageous 5% entry charge (OK, it's currently discounted to 1% to get the punters in, but you get the idea). Secondly there's an annual management charge of 1.75% - way too high for my liking. That's the kind of charge you'd expect a proven, truly world-class fund manager like Anthony Bolton to charge. So what do you actually get for your money?

From their own documentation:
"It is intended that this objective will be achieved by the Fund investing in a portfolio of global commodity Exchange Traded Funds and other global commodity collective investment schemes".

So, they're simply sticking all your money into a bunch of cheap, passively tracking ETFs (these typically charge between 0.1% and 0.5%) and taking the spread difference in charges as pure profit.

Personally I'd steer clear of this fund and invest directly in the ETFs. Over time, a 1% difference in returns can add up to a phenomenal amount of money.

Regards

Firstly Hargreaves and Landsdowne discount the entry fee to 1%.

Secondly it well outperforms the All Commodity ETF see:
http://www.morningstar.co.uk/UK/snapshot/snapshot.aspx?id=F0GBR06XK3

http://www.morningstar.co.uk/UK/snapshot/snapshot.aspx?id=F0000000GA

Thirdly it saves you having to keep chopping and changing your own ETF portfolio to keep up with the market.

Fine, all I'm saying is that less than a couple of years isn't enough time to judge a consistent outperformer, and those management charges will kill your returns.
Just because it's outperformed such-and-such an index in the last year doesn't mean it will continue to do so in future.

Is it really going to give you value for money? Try adding "ETFS All Commodities DJ-AIGCI" to the MFM iFunds ETF Commodity Fund's chart at HL's site. For sure, the ETF has gone through a more volatile patch in August and November, but the overall fund performance is much the same. Hardly a surprise given the shaky market conditions since late 2007. Furthermore, I seem to recall that DJ-AIGCI tracks deriviatives (movements) rather than the underlying commodities / shares themselves. Playing that kind of a risky game implies volatility, so comparing the HL fund to this is a bit like comparing apples to oranges.

You could simply buy exactly the same underlying ETFs as the HL fund - and get more of them for your money by not paying for an initial fund charge - and continue to beat the HL returns by a clear 1% or so because of the total expenses of the HL fund. Surely it's a no-brainer?

As for "chopping and changing your own ETF portfolio" - you don't. Passive index funds are a long-term buy and hold. Period.

Regards

Yes but to replicate the MFM iFunds ETF Commodity Fund i would need a number of passive index ETFs. Over time i would have to vary the proportion of these to keep in step with the market. A fund manger should be able to do this better than i can. Obviously at present the MFM iFunds ETF Commodity Fund is low on base metals and high on agriculture, gold and oils. This is what gives the fund the edge on DJ-AIGCI and it is also a little less volatile.

Don't under-rate youself. 80% of actively managed funds fail to beat their benchmark index over five-plus years. You gotta check out the wit & wisdom of Jack Bogle on this matter:
http://en.wikipedia.org/wiki/John_Bogle

http://www.fool.co.uk/news/your-money/isas...t-investor.aspx

http://marketplace.publicradio.org/display...27/index_funds/

Mmm but it is not hard to position yourself in the other 20% is it ?

I rarely stay in a fund for 5years anyway unless the manager is competent and the fund is outperforming its benchmark.



?



If you had enough money to make it worthwhile after dealing charges after all £1k/3K is not going to get you much Etf/c's diversification, you would be better investing in this fund?

Not sure what you mean here. If 80% of highly-paid (we're often talking six figure salaries here) fund managers fail to beat their fund's benchmark index over the 5+ year term, despite their access to vast teams of resources of fundamental and technical analysts that have covered all major markets for decades, what makes you think you'll do better?
PS. If you really can beat the index long-term (and I don't think you can), chances are you're in the wrong job (see above). Do us all a favour and post 5 years' worth of your winning stock/fund selections and I'll post a grovelling apology for doubting you if they beat the index by more than 5%!


Then you're almost certainly losing money due to the initial charges (these roughly average 3.5% so you have to have quite a constant margin of outperformance just to break even with the index). I suggest you do the sums. Investing is a long term game of risk/reward ratios. Short-term trading goes by another, more popular name: Gambling.


Ganz falsch, mein freund. ETFs (& ETCs) offer great diversification as they are a fund that buys you a basket of underlying shares (for this reason I'm rather wary of some of the more esoteric ETFs and tend to stick to broad, cheap ETFs that track major indices like the FTSE All-Share. YMMV).

For example, how has a cheap ETC like ETFS Physical PM Basket (PHPM) performed over the last 6 months? You've got some diversification as it tracks the price of a basket of gold, silver, platinum and (I think) palladium; this reduces risk a bit (silver, for example, is notoriously volatile), yet offers you a decent reward potential (platinum up 25% a week or so ago. Niiiiice).
EDIT: OK, this is a contrived example. Just trying to illustrate that ETFs can offer good diversification. The best examples of these are the ETFs that track the major market indices such as the FTSE All-Share.

I can't remember if there's a minimum value you can trade; I suspect it's the value of one of your chosen shares (ie. the share price). You can purchase these just like any other share through an online execution-only stockbroker like SelfTrade and pay nothing for purchases and a flat fee of about £12.50 for selling some stock. Nice and cheap, although since I tend to buy-and-hold long-term stocks I think are undervalued, I haven't been clobbered by transaction fees (and I'd recommend you do the same). ETF annual charges are typically under 0.5% making them cheaper than virtually all actively managed funds.

Cheaper and better returns. It's a no-brainer.

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