why do funds perform so poorly?

http://www.elitetrader.com/vb/showthread.php?s=&threadid=58143&perpage=6&pagenumber=4

Quote from OddTrader:

How about a structure like this:
Gross Returns => Incentive Fees => Max DD
40.00% => 20.00% => 10.00%
60.00% => 30.00% => 15.00%
80.00% => 40.00% => 20.00%
100.00% => 50.00% => 25.00%

and a client can choose what (s)he wants from these options? :)
More...

imo, one important factor/aspect for low returns from most funds would be illustrated above - management fees.

As probably many institutional investors prefer a small MaxDD 5% with steady 20% returns, managers of this level of performance can still charge (normally) 2% fees, regardless incentive.

If any investor wants to use 5X leverage to gain 100% by risking 25% MaxDD, (s)he would have to pay also 5X management fees. That means managers can get 10% fees, before incentive. As such, why should a manager offer investors a program of 100% returns and 25% MaxDD by earning 2% management fees only, when 10% is possible?

Any comments?
 
Not all funds perform dismally. Depends on the fund. I held FSENX (Fidelity select Energy) from January of this year to October of this year. I was in and out only twice and made just shy of a 100% ROI in 10 months. Depends on the fund and what it holds, fees. loads, ect. I like the Fidelity Select funds because they are tradeable intra day hourly, so you can get out if you need, or in if you want, and not have to buy or sell at whatever the close is. It was held in my IRA that has Day Trade restrictions so it fit well.
 
one word ===> "iShares"

If I was managing a fund. I would diversify a large part of the portfolio in some of the iShare products. Some great performances in there the last year.

ozzy
 
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