In this essay, I look at how the fund companies report their sectoral distribution to current and prospective unitholders and conclude:
It’s too early for conclusions, I’ve only just finished describing the data!
It is clear, however, that the funds report to unitholders in an inconsistent manner, sometimes (as is often the case with reporting the structural breakdown of the fund) not even internally consistent. While this is clearly an indication of a certain level of sloppiness, it should not necessarily be taken as a reflection of the portfolio manager’s skill, as the portfolio manager will typically be involved in the audit and preparation of financial statements in a very minor way, if at all.
However, it does show that there can be no such thing as a casual investment in a preferred share vehicle, as (unlike bond funds) funds and their strategies cannot be compared directly via summaries prepared by the fund companies with any confidence whatsoever.
Look for the research link!
