http://www.thickenmywallet.com/blog/wp/2008/05/28/why-large-mutual-funds-under-perform-the-market/ Everything to do with thickening your wallet Wed, 01 Feb 2012 15:44:00 +0000 hourly 1 http://wordpress.org/?v=3.3 http://www.thickenmywallet.com/blog/wp/2008/05/28/why-large-mutual-funds-under-perform-the-market/comment-page-1/#comment-11242 Thicken My Wallet » Blog Archive » Why I became a passive investor Thu, 05 Jun 2008 09:01:42 +0000 http://www.thickenmywallet.com/blog/wp/2008/05/28/why-large-mutual-funds-under-perform-the-market/#comment-11242 [...] Why large mutual funds under-perform the market [...] [...] Why large mutual funds under-perform the market [...]

]]> http://www.thickenmywallet.com/blog/wp/2008/05/28/why-large-mutual-funds-under-perform-the-market/comment-page-1/#comment-11048 Robillard Fri, 30 May 2008 05:26:52 +0000 http://www.thickenmywallet.com/blog/wp/2008/05/28/why-large-mutual-funds-under-perform-the-market/#comment-11048 Huge mutual funds either restrict themselves to stocks that won't be terribly moved by large investment, such as those with large market capitalisations and floats, or they find some other way to get build up or liquidate their positions. A lot of institutional investors opt for the latter choice. Large funds may draw out the buying or selling process by breaking up their order into smaller, more manageable orders. Other option is to route the order through a specialised trading firms that will guarantee them an average price. One final option worth mentioning is that institutions are major users of darkbooks or dark pools. Sure, the US exchanges let traders place hidden orders but they are easily noticed by market participants. Darkbooks have the advantage of having restricted clienteles, and are not required to match market-sweeping routed orders from the rest of the market (as I understand it, Reg NMS makes this mandatory for public exchanges) allowing orders to be hidden from the general public and creating the potential for price improvement. Huge mutual funds either restrict themselves to stocks that won’t be terribly moved by large investment, such as those with large market capitalisations and floats, or they find some other way to get build up or liquidate their positions. A lot of institutional investors opt for the latter choice. Large funds may draw out the buying or selling process by breaking up their order into smaller, more manageable orders. Other option is to route the order through a specialised trading firms that will guarantee them an average price. One final option worth mentioning is that institutions are major users of darkbooks or dark pools. Sure, the US exchanges let traders place hidden orders but they are easily noticed by market participants. Darkbooks have the advantage of having restricted clienteles, and are not required to match market-sweeping routed orders from the rest of the market (as I understand it, Reg NMS makes this mandatory for public exchanges) allowing orders to be hidden from the general public and creating the potential for price improvement.

]]> http://www.thickenmywallet.com/blog/wp/2008/05/28/why-large-mutual-funds-under-perform-the-market/comment-page-1/#comment-11043 This and That Fri, 30 May 2008 03:11:50 +0000 http://www.thickenmywallet.com/blog/wp/2008/05/28/why-large-mutual-funds-under-perform-the-market/#comment-11043 [...] Thicken My Wallet on why large mutual funds under perform the market. [...] [...] Thicken My Wallet on why large mutual funds under perform the market. [...]

]]> http://www.thickenmywallet.com/blog/wp/2008/05/28/why-large-mutual-funds-under-perform-the-market/comment-page-1/#comment-10979 Canadian Capitalist Wed, 28 May 2008 14:24:11 +0000 http://www.thickenmywallet.com/blog/wp/2008/05/28/why-large-mutual-funds-under-perform-the-market/#comment-10979 Thanks for the link. IIRC, it costs large funds about 1% of a position (I don't remember the exact percentage) when they buy or sell a stock. Thanks for the link. IIRC, it costs large funds about 1% of a position (I don’t remember the exact percentage) when they buy or sell a stock.

]]>