Avoid Supporting Your Fund Manager’s Lavish Lifestyle
Some things never change. In 1940, Fred Schwed wrote a humorous book called, “Where Are the Customers’ Yachts?” It was about the dichotomy between the lavish lifestyle of those who manage money and the far less glamorous struggles of those whose money is being managed.
In 2006, Paul Farrell noted in a MarketWatch blog post that more than $200 billion was being “siphoned off” by the mutual fund industry annually in fees. According to the Investment Company Institute, total assets in mutual funds exceeded $13 trillion in 2012. Despite this growth in assets, equity fund investors paid an average of 0.77 percent in expenses, according to the 2013 ICI research paper, “Trends of Expenses and Fees of Mutual Funds, 2012,” which was down a meager 0.02 percent from 2012. Clearly, savings from economies of scale are not being passed down.
The tipping point (for me) came with the recent news that a hedge fund manager paid $147 million for an estate in East Hampton, New York. This purchase is reportedly the most expensive home ever sold in the U.S.
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