Four reasons why private investors have an edge over professional fund managers
Kevfle recently posted an intriguing article called “Can we beat the professionals?’ In this he touched on some interesting questions around the investment industry, which provoked a flurry of responses from our fantastic community here at Stockopedia.
Kevfle seemed to have several questions on his mind, including:
- Can we actually ever outperform the pros?
- Am I wasting my time?
- Is it easier to choose and evaluate a group of funds instead?
- Can I achieve similar results leaving it to the pros?
In the first of this two part series, I will seek to address the first two questions, investigating where there might be scope for the individual investor to outperform and whether it’s worth the effort.
Can we ever outperform the pros?
In order to answer this, we need to define where our edge is.
Firstly, let’s take a look what we are up against. Our competitor investment management company has an army of analysts, each highly qualified with an MBA, PhD and several investing qualifications. They are able to assign individuals not to look at a whole market, but investigate businesses within an industry or in some cases just a handful of companies that the analyst will eventually get to know better than their CEOs. All of these ideas are pitched to the fund manager who then decides, with help from their 6-figure-per-year risk system, how to construct the portfolio.
The scale advantages may seem overwhelming, but there are several disadvantages that the institutional investor must contend with. It is in these disadvantages that the private investor can seek their edge.
The first is liquidity.
Investor Edge 1 - Liquidity
“It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.” - Warren Buffett
“If I were working with a very small sum – you all should hope this doesn’t happen – I’d be doing almost entirely different things than I do. Your universe expands – there are thousands of times as many options if you’re investing $10,000 rather than $100 billion, other than buying entire businesses. You can earn very high returns with very small amounts of money.” - Warren Buffett
The average equity fund manager has around £650m in assets. This means that if they want to allocate 4% of their fund in a stock, there needs to be sufficient liquidity for a £26m inflow. This makes a large, less liquid part of the universe uninvestable for multiple reasons. Firstly, for some stocks a sizeable inflow could result in the fund manager owning a sizeable percentage of the company stock. Due to the takeover code, owning more than 30% of the shares in issue may require a mandated offer for the whole company.
Even a 3% ownership of a company adds the extra regulatory burden of a notification of the acquisition or disposal of major shareholdings. Fund managers are therefore often restricted in their investment mandate regarding percentage ownership of a company. When combined with the necessary large transaction sizes, this limits the investment universe due to an inability to purchase a sufficient holding size to have an impact on portfolio performance.
The large position size in monetary terms also adds further complications. When entering into a position it is likely that the high volume of shares required will negatively impact the price of the desired shares, resulting in a higher price for purchases. This is known as market impact. Upon exiting a position, the high volume of shares will again negatively impact the price of the desired shares, resulting in a lower price for sales. The severity of this impact means that they risk being a forced holder of shares due to a reduced ability to exit, a forced buy and hold.
In order to prevent this predicament, funds will have liquidity constraints meaning they cannot go into a stock if doing so would take up a large percentage of average daily volume. The means even moderately liquid shares are out of scope for large funds. Given the drive of portfolio risk teams to test liquidity of the portfolio in stressed conditions (such as liquidity conditions in the Financial Crisis), this further reduces the investable universe.
With smaller trade sizes, the individual investor has a considerably wider investment universe available to them and is not restricted by limited liquidity. Individuals enter and exit positions in smaller quantities and as such have lower impact on the price of the shares. We can be more dynamic to change and do not need to be locked into our investments - allowing us to run our winners and promptly sell our losers.
Investor Edge 2 - More Control of Mandate and Portfolio Construction
“Control your own destiny or someone else will.” - Jack Welch
When a fund is created, it must complete and submit a prospectus which provides details on the legal and self imposed constraints that it will work within. Further to this, the fund will also have further internal constraints. These will typically include:
- Position sizing, determining the maximum and minimum percentage of assets that the fund manager can make to a single stock
- Aggregate allocation to certain vehicle structures and cash
- Aggregate sector allocation in absolute terms or deviation from the benchmark allocation
- Aggregate tracking error restrictions from the benchmark
There are also further constraints based on the structure of the fund. Many fund houses will try and structure their funds compliant with UCITS, which means they can then be passported across the European Union. This widens the potential pool of investors and opens the fund up to other institutions which only invest in these vehicles. However, structuring a fund in this way adds additional constraints in portfolio construction, particularly around position sizing. Funds compliant with UCITS may have a maximum of 5% of the fund that can be invested in a stock, no matter the fund manager’s conviction. If the stock does continue to perform well the position must be continually reduced, forcing the fund manager to cut their winners, rather than letting them run.
There are also further external pressures concerning the style of the fund manager. If the fund is marketed as a certain style, such as a value fund, then it is frowned upon for the manager to invest in a non-value stock, even if they believe that it is an attractive opportunity. There is a lot of pressure for the manager to avoid style drift even if the current investment environment is unfavourable to that style. These restrictions can be justified as we (the investor) would want the fund to stay true to its style. However it does add another layer of constraints for the universe the manager can invest in.
The private investor has considerably more flexibility in their allocation rules and construction of their portfolio. We are not constrained by a certain style and can choose what we believe to be the most attractive opportunities, no matter the style, sector or benchmark weight. We can choose to be concentrated in our best ideas or build a more diversified portfolio in line with our conviction. Finally, we can use cash or other assets as an alternative to dampen volatility of the portfolio in line with our risk tolerance and view of market conditions. By contrast, the fund manager will often be forced to take a diluted approach to investment risk control via sector allocation (like allocating more to defensives in stressed markets).
Investor Edge 3 - Longer Time Horizon
“If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people… Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue” - Jeff Bezos
For an industry that stresses the importance of thinking long term, some may be surprised to learn how much focus is placed on short term fund performance. Fund management is a very competitive industry and each period of performance is scrutinised both internally by management and risk teams and externally by media and competitors. Often a long steady record of performance can be discounted by “yeah, but how have you performed year to date?”
This is also compounded by the industry’s trait of focusing on rolling periods to evaluate performance. This is again a rational response given that one cannot buy past performance, however it does make assets with certain return payoffs hard to hold for a professional fund manager.
Suppose that you have an asset that has a negative cost of carry (either in absolute or relative to a peer group/benchmark), but on occasion generates a large positive performance.
For illustration, one of the many possible portfolio performance returns is provided below. In this simplified example, there is a 20% chance of a 25% (relative) return in a period and a 80% chance of -2% (relative) return, resulting in a positive expected (relative) return of 3%. This is an asset with positive expected return and a positive skew.
We can see that although the performance over the whole period is attractive had you owned the portfolio since inception, on a rolling basis it appears to be less attractive and the small periods of success are quickly ‘forgotten’ or could quite easily be determined as ‘unrepeatable’ from an outside view.
Unlike individuals, who are by definition invested since inception and get to keep all their performance, the lumpy periods of returns have a tendency in the industry to be quickly discounted by the longer period of negative performance. To ensure fund managers provide a return payoff that is attractive for investment, it is preferred to generate a smoother performance profile rather than a lumpy returns, even if a lumpy profile may generate more returns over the longer term.
As Jeff Bezos wisely noted above, a simple way to gain an edge over a fund manager is to give yourself a longer term horizon. The competitive pressure of the industry means that a large number of fund managers are unable to focus on the long term, despite knowing its importance.
This neatly links to the biggest advantage the individual has over the fund manager, a lack of career risk.
Investor Edge 4 - Lack of Career Risk
“Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.” - John Maynard Keynes
In the film ‘The Big Short’, we hear the story of Michael Burry, the fund manager at Scion Capital who is early to identify the instability of the US housing market. He uses collateralised debt obligations to bet against the housing market, which requires a monthly premium to be paid, creating a burden to the performance of the fund whilst waiting for the housing market to crash. It is in this period that we get an insight into the pressure that Michael is put under by his investors as the losses continue to grow, with many demanding to withdraw from the fund. Michael is subsequently proven to be correct, earning 489% for investors, but was impacted by the experience: “disheartened on many fronts, I shut down Scion Capital in 2008”.
The typical fund manager won’t be making $1bn bets against the housing market, but investors should not underestimate the large impact career risk can have on fund manager positioning. Even if a fund is described as benchmark agnostic the pressures of performing against the relevant index are still apparent. Internally, fund managers are constantly pressured on losing positions and externally prolonged periods of relative underperformance are often punished with asset outflows.
A survey by CFA Institute asked how long investment teams could underperform at their firms before they should start to worry about their jobs and the results were startling:
“Of the 774 respondents, 78% said that career risk due to underperformance is a factor at their firms, and the largest number (28%) said that between one to two years was the time period when job security would start to be an issue. Another 13% said that in even less than one year the investment team should be concerned. In other words, 41% said investment teams have less than two years to turn around underperformance or it may be time to dust off the resume.”
Joachim Klement’s paper demonstrates how even a potentially successful investment strategy may not be one that can be maintained by a fund manager due to the career risk effect.
If a fund manager has an annual alpha of 2.5% and a tracking error to the comparison benchmark of 5% (an impressive Information Ratio of 0.5), then, Klement points out, the manager will have a:
- 31% probability of underperforming in a given year
- 40% probability of underperforming in a given quarter
- 44% probability of underperforming in a given month
Given that a period of underperformance may result in the fund manager losing assets (or being fired) then there is an incentive to reduce deviation of returns from the benchmark. The term closet indexer is often used to describe when this is taken to the logical extreme. As fund managers are rarely punished for offering benchmark-like returns, then it makes sense to ensure that tracking error is low. This comes at the expense of leaving potentially attractive investment options on the table.
As private investors, we are afforded the luxury of being able to be truly agnostic to our return versus a benchmark, without fear of sudden outflows. Provided we maintain a good investment discipline, we can choose to holds positions that may underperform the benchmark in the short term if we believe the longer term prospects are strong, without being pressured by internal or external forces.
Am I wasting my time? - the intangibles
Throughout this piece I have been focussing on tangible reasons for adopting a personalised approach, however there are other softer yet no less key aspects to this question.
An investor must consider if they gain any enjoyment or utility from managing their portfolio. If one does not, then a suitable alternative may be outsourcing portfolio management to an external fund. On the flip side, many of our community will agree that they like the intellectual challenge of the markets and derive utility from seeing the impact of their decisions on their investment performance and ultimately their lifestyle.
The knowledge and skills developed can compound up over time, allowing you to improve future investment performance and pass on your knowledge to future generations. As Benjamin Franklin noted "an investment in knowledge pays the best interest."
Conclusion
Managing your own portfolio isn’t for everyone. With the plethora of passive options that are widely available, investors can now very easily achieve satisfactory market-like returns. However, the fact you are on Stockopedia implies that you, like myself and the rest of the Stockopedia community, believe it is possible to attain excess returns and are eager to do so.
With more information available than ever before and transaction costs trending down, there has never been a better time to be an investor. If we choose to adopt a personally managed approach, we should seek to continually improve our investment knowledge and ensure that our processes incorporate our advantages as private investors.
What other key edges do you think individual investors have over institutions and how have you adopted this into your approach?
About Oliver Cooper
I am a CFA charterholder and Head of Product here at Stockopedia. My job is to get the most out of our fundamental data by exploring new ways to present and interpret it.
My experience is predominantly based around Portfolio Construction & Risk; researching and implementing quantitative techniques to create better portfolios and make better decisions.
Disclaimer - This is not financial advice. Our content is intended to be used and must be used for information and education purposes only. Please read our disclaimer and terms and conditions to understand our obligations.
You're correct Purpleski it was meant to be a joke answer to 'tagware' who, enviably, said that he made 450% total OVER a period of 5yrs. I haven't made that in my 24yrs trading!! :)
Sorry if my post wasn't clear...and I can't edit it now.
I've been 'investing' in the market since I got drawn into it by some early success in the SKY flotation in 1994 and like you I've thoroughly enjoyed the intellectual experience. It's like playing the piano, which I also don't do very well, in that it's totally open ended and no matter how many hours you devote to it you will never, realistically, master it all.
Life and emotion tends to get in the way of making money and, as you're finding, it is extremely painful seeing all one's hard work going up in smoke during a sell-off :( I've done that many times but now sell sooner rather than later.
When you get to my age, making use of the 'Eighth Wonder of the World' (compound interest) is less feasible or attainable! :) Also it's increasingly futile to think 'long term'!! :)
You've got to laugh..... well, I believe that you are meant to!
It seems to me that there are four real alternatives here (or a combination of them):
1) Research and invest in individual shares. A lot of time needs to be devoted to this to be successful.
2) Research and invest in actively managed funds. This requires some time but less than (1)
3) Research and invest in passive funds. Again requires a bit of time but less than (1) and (2).
4) Outsource all investment decisions to a financial adviser. This requires no time but costs money.
Unless you do this as a hobby, then you need to value your own time in carrying out the research. The question then is whether you can recover the value of that time in the improved performance that you achieve and, if so, which of (1) (2) or (3) (or which combination of them) gives the best recovery rate.
For the last 7 years or so I have followed (1) and (2) as a hobby. If I price in my time however, I'm still not sure whether I am recovering the value of my time in improved performance.
I think you are right, I think there is a lot more stress in your portfolio, if say several shares fall 15% or so as has happened this week, you wonder why, shall I sell etc. If they are in a fund you probably won't even know. Looking at some funds they seem to be holding up better than my shares.
Going forward I think I will cut back my portfolio and put about 50% in funds, let them take the strain and someone else can stress about them. It is also too time consuming. Going forward I probably won't have so much time.
Funds do have certain advantages, lower costs and sometimes can buy shares at a discount and wider diversification.
.png)
5) Create a Stockopedia NAPS portfolio requiring a couple of hours efort per year.
I have both worked (and work) in a fund and have been a (fulltime) private investor at different times in my career. A couple of observations (for either side of the argument):
1. Many private investors are selective about their recall of the performance of their investments. Their memory recalls their successes and forgets their failures - especially in the pub!
2. Time cost - to truly understand your returns as a private investor you ought to estimate what the value of your time is - and charge that against your portfolio returns. If you invest in my fund you are paying for me to invest whilst you sit on the beach (or do your day job etc). As well as time you are paying for my experience and expertise (or my degree of incompetence).
3. Mandates are important. For instance saying that an index fund beats 99% of active fund managers is nonsense because 100% of active fund managers do not have a mandate to beat the index (and often the index that they are compared against is not even in their mandate).
4. The pressure to invest. I am an extremely conservative investor. To misquote Michael Caine I don't want to shoot 'until I see the whites of their eyes'. This means that I have run a high degree of cash through this year. I am now in a position to deploy some of that in this market shakeup. However all year, my institutional investors (and some of my colleagues), though incredibly supportive have, I am sure, been wondering why are they paying me to sit on cash.
5. Environment. My best investing period was working for myself from home. I could control the environment from simply things like chair, desk, noise, temperature. Working on a trading floor is incredibly distracting. The positive is that one gets some 'sense' of the market - but often that is overstated. I sit in a corner and put on big over the ear noise cancelling headphones. Would I prefer to sit at home - absolutely! Would institutional investors or regulators be happy with that - no!
6. Decision making. As a private investor you can change your mind 20 times in a day. You can take a position behind the bike sheds and shoot it. My investors get transparency into my fund, and I write monthly and quarterly reports which fill numerous pages (I am probably more wordy than most). I think it is a good discipline to write down why you have invested in something. But when it is circulated it becomes psychological much harder to say 'I got it wrong' or 'I have changed my mind'. When you see private investors who have made money by holding a position for eg 10 years it is not always clear whether that applies to all their portfolio nor is it clear how many other positions have their closed etc
7. Time. There is a degree of stereotyping of investment managers which basically goes along the lines of 'they turn up to work at 10am, they go for long lunches, get inside tips and brokers tell them what is hot, and they are out the door by 4.30pm'.
I am sure there are some like that. But I grew up on the wrong side of the tracks. Tomorrow I will be out of bed around 5.30am. I will be on my way to the City by 6am. I will arrive at work a little after 7am. Some days I do not leave until 7 - 8pm. (+ then 1.5 hour commute home). Last two nights I had business dinners and did not get home till midnight.
I will frequently be working at weekends. I will be working on the train and the tube.
When I worked for myself from home I got up when I wanted, walked across the house and was at work. That alone probably saved me 3 hours plus per day. Add in all the internal meetings I have to go to and I reckon a full time private investor might have a 3 - 4 hour advantage over an institutional fund manager.
And I don't get paid enough to afford to move into central London. Incidentally on that topic I know a number of people who work in the City whose families live 3 - 4 hours away so eg the husband ends up either living in a flat or hotel etc for 3 - 4 nights a week and leaves early Fridays to get home; and wakes up early on Monday to get to work (or goes to London on Sunday night). Don' t underestimate the number of divorces in the City; and the pressure on people. I have known colleagues having prescription anti-ulcer tablets on their desk.
8. Tax - some of the comparisons do not fully adjust for tax. For instance if I buy a US stock in my fund it will receive dividends after withholding tax. Often the comparison to index funds is flawed as index returns _might_ include gross dividends. (This is not totally black and white - depending on your position you might have to pay tax as an individual on the dividends your index ETF receives - or you might not!)
9. Technology. Retail brokerage platforms are designed to deal with high volumes of trading with lots of customers so their systems are designed to do this. I have worked at a number of institutions - and each one had a different system with different 'features'. And not all systems work smoothly or cleanly. Sometimes technology can be extremely painful for an institutional fund manager.
10. I run two funds, both of which trade internationally, with different currency rules. For one I have to manage the whole balance sheet - ie I have to hedge the currencies. So I have to trade currency forwards and do spot trades every time I buy a stock in a non-fund currency. I also do shorts so I have to borrow stock. I have to use CFDs (contracts for differences). And I have to ensure treasury management ie buy treasury bills and roll them. Our back office has to reconcile our positions with our custodian and prime broker. And we have to make sure both funds are roughly in line (subject to acceptable slippage). So one 'trade' can lead to multiple separate activities (eg sell a treasury bill to get cash; move cash from one bank account to another; convert from one currency to another; buy a fx forward; check that the equity trade has been reconciled and then delivery vs payment; ensure that the trade has been appropriately split between the funds etc).
Sometimes I miss the simplicity of running my own money from home.
Research:
I am sometimes 'bemused' by what people think. I was told by a private investor he had 'Bloomberg'. What he meant was that he watched Bloomberg TV and used the website to read articles. There is a reason we pay tens of thousands per seat at the firm I am at for Bloomberg.
Nonetheless Bloomberg can be incredibly distracting - and I still fondly remember sitting at home and reading annual reports myself in peace and quiet. Though I really like Stockopedia I would highly recommend that a private investor print out and read the annual report of a company they are looking at. Add in company presentations, conference call transcripts etc and you will have an advantage over many in the City.
If you want to understand the advantage that a private investor has then do the following:
- print out a 200 page + annual report in colour (and remember in some institutions I have worked at they frowned at the use of colour ink!)
- go and sit in a busy railyway station (eg Waterloo or Victoria) on the concourse during rush hour
- and try going through the report
- that is a pretty good simulation of the environment of a typical desk analyst at a large fund or bank!
Career risk:
Oliver wrote about career risk. Let me add something else to the mix:
Most private and insitutional investors will not invest in a fund unless the fund manager has 'skin in the game'.
So a very substanial amount of my net worth is in my fund,
Now think about what happens on a day like today (FTSE down nearly 2%; and down 8.86% for the year). I face the following (i) career risk (ii) financial risk (iii) family stress as a result of the previous two.
Suppose I was also mortgaged to the hilt and had very young children and student loans.
What pressures would I be under - of course I would want to focus on career risk - every minute of every day.
(Fortunately or unfortunately I am too old and grumpy to worry about career risk - partially as my plan B is working from home! But if I was younger I surely would be index hugging for that reason).
That's a very thorough and illuminating post roddy10.
I particularly relate to the joys of being able to do research in the home environment in some peace and quiet. Open plan offices must be the greatest causes of inefficiency for anyone whose job involves the need to do some actual thinking.
Then add in the irritation of petty corporate cost controls like colour printing for some further distraction. At home I can have as many large computer screens on my desk as I want to pay for.
It's noticeable from videos I have seen of Warren Buffet that he has a very peaceful, homely, and comfortable office well away from the distractions of Wall Street.
as i heard earlier fund managers only invest in bigger shares coz of the trading volume,, so private investors can jump in on bargains they cant.,, plus when you see down trends easier to sell for smaller investments,,ive been hit like most, but if continues tom ill get out until market settles, fund managers cant just sell millions ,,
Thank you for your kind words regarding the article. The impact of fees is one of the aspects that I will be investigating in my follow up article, which should be available next week.
Hi Oliver,
How about discussing pros buying shares at a discount, don't think that has been covered? What I mean is often when new shares are issued they are only offered to the pros (fund managers etc.). This has happened quite a bit to my shares recently, Burford Capital (LON:BUR) was the latest, they could buy them about 7% cheaper than the current market price, PIs were not allowed to participate. Also I have read that brokers can fill orders at a discount, it has even been suggested that they may downgrade the shares in order to reduce the price.
There is also the issue of information, now PIs get little access to broker notes etc. something Paul Scott has complained about. This is not a level playing field.
Roddy10 para 4 makes an important point: I do not have to invest. When the market turns sour I can sell immediately and stay in cash for as long as I like.
Re time devoted: Yes - when I worked for a living I had no free time 7:30 to 18:30, and outside those hours had other things to do. As a retired person I can make investing a hobby, reading for the enjoyment whether or not it is directly related to my modest investments.
Thanks Oliver. All very good an interesting points. I personally think the benchmark should generally be passive funds rather than professionals. But actually in the mid-cap space I think active managers are meant to add value.
Excellent points in the article. At the same time private investors have disadvantages over institutional investors. So it is another question as to whether there is a net advantage for private investors? Institutional investors are able to meet management etc.
If I look at some of the best active managers - Terry Smith, Keith Ashworth-Lord, Nick Train - it might be the case that they are hard to beat. So probably we can change the question again to can a private investor beat the best professional investors? We can all invest in their funds.
Personally I think funds and stocks if you want are a good way to go. It doesn't have to be a all stocks or all funds approach. As Patisserie Holdings (LON:CAKE) shows we really need say 30 stocks if we own small caps. That can be a lot of monitoring. So maybe 6 funds at 80% of a portfolio and 10 stocks might not be a bad approach.
The hard part about picking stocks, in my view, is waiting for the exceptional opportunities. Picking less stocks and having funds to fall back on helps an investor to wait for these great opportunities to come along.
Valerie Patisserie illustrates a couple of important points:
1. How much due diligence do you do?
2. How much do you trust others?
3. Are higher priced stocks more risky?
Re due diligence - over the years I have found that to really get to know a company I need to read, read and read. However the issue that disconcerts me is that sometimes I have found companies that others find value but I scratch my head eg:
- a $10bn company with broken links on its website, overexaggerated claims on the product it made (ie the physic was impossible) and claims of academic expertise that was overstated
- a multi-billion UK company with 'interesting' accounting and questions around its product (ok, you guessed it - Autonomy)
- a billion plus UK company which appears to have broken UK credit rules (indeed the actual basis of its business appears legally dubious)
- a multi-billion Euro company where I am not sure any number in the accounts is real
I have been known to stand outside an office counting staff going in and out - in one case this was because I believed a company was overexaggerating how many clients it had processed.
One really useful question I ask myself is 'are the management open, frank and honest'? It is remarkable over the years how many companies fail this simple test. I also then ask 'what is the pedigree' of the management?
For instance, over the years, I met a number of companies where the management team originated in Hanson Trust or similar companies. Often the managements would focus on cost cutting.
Often I was most successful in finding frauds as a private investor because you have to time to dig and stand outside an office etc.
I hope the above helps
I disagree with the idea that less money is better, both for the fact that it drives prices higher when buying, and leverage is cheaper; A 400 million investment into a 1B market cap company produces an instant equity buffer once significant purchases have been made, as an extreme example.
Leverage is also significantly cheaper the bigger you are, generally.
Hello Andrew, thanks for the comment.
It is certainly conversely true that institutional investors have some advantages over private investors as noted at the start of the article; whether there is a net advantage depends on how much the investor adopts their advantages into their process.
With regards to whether we can beat the best investors….the challenge here is also identifying the best investors ex-ante as investing in their funds after success may not imply future returns. This is something I investigate in my follow up article here.
*Past performance is no indicator of future performance. Performance returns are based on hypothetical scenarios and do not represent an actual investment.
This site cannot substitute for professional investment advice or independent factual verification. To use Stockopedia, you must accept our Terms of Use, Privacy and Disclaimer & FSG. All services are provided by Stockopedia Ltd, United Kingdom (company number 06367267). For Australian users: Stockopedia Ltd, ABN 39 757 874 670 is a Corporate Authorised Representative of Daylight Financial Group Pty Ltd ABN 77 633 984 773, AFSL 521404.
FREng
Industry data is freely avaiable at Trustnet. For example, they provide performance data for 48 Funds which have the mandate of 'UK Smaller Companies'
https://www.trustnet.com/fund/...
But performance is disparate. In the past year Liontrust has outperformed Threadneedle by over 23 percentage points. Quite difficult to separate skill from risk taken & market cap range chosen (FTSE Small cap, FTSE Fledgling, AIM100, AIM AllShare?)
For this reason I just use the benchmarks as a sanity check on my own performance. After all, the Funds will on average perform in line with the benchmarks in the long run (pre-fees).