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[LC0112G]

If a fund manager puts half of his (other people's) money into stocks which perform poorly and the other half into stocks which perform well, then his fund should break even. Half his clients will win, the other half lose, but he will always make money.

That's not how it works. In that situation all his clients would break even. The client is buying units in the fund. Each unit is identical, and consists of an identical mix of multiple underlying stocks/assets. The value of the units in the fund goes up and down as the values of the underlying stocks go up and down. Since all units are equal, everyone wins, loses or draws together.

It's true that the fund manager will always make money. However, a passive tracker is guaranteed to underperform the index it is tracking because there are always costs (even if it's only 0.1%). If the index rises 5%, the tracker will then return 4.9%. There are some markets where trackers work - but the big returns are in developing markets, China, India etc, and very often it's best to opt for a managed fund here.

[LC0112G]

It's good for governments as well, because the half that win pay tax on it. 

Not in a pension or ISA they don't. 

[LC0112G]

I have a general distrust of fund managers.

If the markets are performing well they take all the credit. If the market performs poorly apparently it is not their fault.

If they make poor decisions with your money they are not accountable and probably still get a huge bonus for failure.

That's a fair enough criticism IMV, but it's no excuse for not doing anything. If you think you can do better than a fund manager then go for it. Or just use some form of tracker. The problem is that most people don't have the knowledge to pick individual stocks to form a balanced portfolio. You also need quite a lot of money (probably £20K+) to be able to buy enough different shares to mitigate the risk of one of the companies going bust.

Lumping it all on Northern Rock was disasterous for many, and there will be many other "Northern Rocks" in the future.

[tunnie]

Think mine is 'Towers Watson', but I'm not sure how much they spread it about

I don't follow the details of mine close enough, should look into it more.  All I know is I used to pay in 4%, Sky 8%, but one year I put some of my pay rise to it, so I also put in 8%. It must clearly be proving expensive for Sky to now only offer 3%/6% as standard joining setup.

I think I can go into it and pick which funds to use, I can then choose where to put them, but I know zip all about markets and stuff, so I just leave it 

[STEMO]

If a fund manager puts half of his (other people's) money into stocks which perform poorly and the other half into stocks which perform well, then his fund should break even. Half his clients will win, the other half lose, but he will always make money.

That's not how it works. In that situation all his clients would break even. The client is buying units in the fund. Each unit is identical, and consists of an identical mix of multiple underlying stocks/assets. The value of the units in the fund goes up and down as the values of the underlying stocks go up and down. Since all units are equal, everyone wins, loses or draws together.

It's true that the fund manager will always make money. However, a passive tracker is guaranteed to underperform the index it is tracking because there are always costs (even if it's only 0.1%). If the index rises 5%, the tracker will then return 4.9%. There are some markets where trackers work - but the big returns are in developing markets, China, India etc, and very often it's best to opt for a managed fund here.

I see, thank you 

[Field Marshal Dr. Opti]

I have a general distrust of fund managers.

If the markets are performing well they take all the credit. If the market performs poorly apparently it is not their fault.

If they make poor decisions with your money they are not accountable and probably still get a huge bonus for failure.

That's a fair enough criticism IMV, but it's no excuse for not doing anything. If you think you can do better than a fund manager then go for it. Or just use some form of tracker. The problem is that most people don't have the knowledge to pick individual stocks to form a balanced portfolio. You also need quite a lot of money (probably £20K+) to be able to buy enough different shares to mitigate the risk of one of the companies going bust.

Lumping it all on Northern Rock was disasterous for many, and there will be many other "Northern Rocks" in the future.

My understanding (perhaps wrongly) is that most fund managers are 'whizzkids' in their early twenties and treat 'playing' with other peoples savings as a bit of fun with no consequences for them if it all goes tits up.

I had a managed fund with an endowment mortgage many years ago. I paid in more than £20000 which expert fund managers reduced to £6000. If I'd put the money in a shoe box under the bed it would still have been £20000. In a high interest bank account probably around £35000.

The financial services sector is a great place for the 'reward for failure' culture    

[Migv6 le Frog Fan]

Ive met quite a few fund managers. None of them were in their twenties. They were all serious and boring 40 somethings.
The reward for failure culture, which used to apply to the privileged few at the top, is long gone. Its all about compliance now.
Compliance depts. rule the roost nowadays.

[LC0112G]

I had a managed fund with an endowment mortgage many years ago. I paid in more than £20000 which expert fund managers reduced to £6000. If I'd put the money in a shoe box under the bed it would still have been £20000. In a high interest bank account probably around £35000.

The financial services sector is a great place for the 'reward for failure' culture

That problem is at least 20 years gone. And the problem wasn't so much that the investments lost money, it was that the charges on the funds were both opaque and huge so they ate into both the profits and the original investment. Things have changed massively in the past 10 years in particular.

It is perfectly possible nowadays to get managed funds with less than 1% p/a management fees, although some of the more exotic ones can go up to 2%. Here's one of the UK's most popular :
http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/i/invesco-perpetual-income-class-y-accumulation

A tracker fund can be less than 0.3%. Here's an example : http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/h/hsbc-ftse-all-world-index-class-c-accumulation

There are also platform fees to be added on top - basically paying a company to hold your selected funds in the wrapper. These can be percentage based or flat fee but you shouldn't be paying more than about 0.5% or £100-£200 (whichever is lower for the amounts you have) per year tops.

So a low cost tracker on a low cost platform should come in at less than 1%, and possibly less than 0.5%.

Disclosure : I don't hold either of those funds, and nor do I use HL anymore - too expensive @ 0.45%.

[Migv6 le Frog Fan]

I currently use Royal London, Aviva, and my daughter. I haven't checked how competitive or expensive the first two are for a while.
The third fund has done quite well and has no charges attached. The costs incurred in setting up that fund were all incurred a long time ago.