Friday, December 31, 2010

Movement to Reduce Investment Costs Accelerates

Selected recent articles follow.  Happy New Year!

This NYT article suggests that conditions are favorable for private equity investors to get better terms from buyout firms, many of which are on the ropes - as this article in The Deal relates - and in dire need of "new money."  Management fees and carried interest compensation are specifically targeted for reduction.  Preqin, an investment research firm that focuses exclusively on so-called alternative assets, reports that in 2009 management fees for new funds of more than $1 billion dropped by 17% from a year earlier, according to the NYT.

Low cost index fund portfolios continue to outperform most managed portfolios, as columnist Scott Burns updates us here.  But wait, there's more!  The WSJ reports that new types of index funds - let's call them index funds 2.0 - are in the works that will be even more difficult for active money managers to outperform.  In particular, these "next-year's-model" index funds will be less susceptible to being taken slight advantage of through others' front-running.

Employers recovering from financial crisis-induced panic attacks that led to the elimination of 401(k) matching contributions are beginning to restore those matches.  The restoration is often on a phased-in basis that reflects caution.  Scott Burns observes in this column that low costs can be as valuable to your 401(k) account as an employer matching contribution.  Who knew?  Here's an instructive how-to article on bolstering your 401(k) account returns by lowering the costs borne by your account.  (The article quotes David Loeper, the author of a great book extolled in a prior post.)

Best wishes for personal health (and what else really matters?) and healthy investment returns for the coming decade.

No comments:

Post a Comment