High investment management fees and expenses from actively managed accounts and funds continue to be in the news. With lower investment returns predicted, high fees will take a bigger bite out of portfolio returns going forward in the new normal economy.

The following are some excerpts from the business and investing press regarding this topic:

...roughly 90% of the $1.5 trillion in 401(k) and other defined contribution assets in mutual funds are in actively managed offerings with expenses close to 1%. Paying for those "potions" (i.e. services) during an era of asset appreciation with double-digit returns may have been tolerable, but if investment returns gravitate close to 6% as envisaged in PIMCO's "new normal," then 15% of your income will be extracted...  Investment Outlook, by Bill Gross, August 2009

...according to a study by Mark Kritzman, President and CEO of Windham Capital Management. "It is very hard, if not impossible," he wrote in his study, "to justify active management for most individual, taxable investors, if their goal is to grow wealth." And he said that those who still insist on an actively managed fund are almost certainly "deluding themselves." "The Index Funds Win Again" by Mark Hulbert, New York Times, February 22, 2009

Owning the market remains the strategy of choice. Such a strategy guarantees a return that lags the market return by a minuscule amount, and exceeds the return captured by active equity-fund managers as a group by a substantial amount. Why? Because the heavy costs incurred by investors in actively managed equity funds can easily amount to 2% to 3% annually. Typical expense ratios run from 1% to 1.5%; the hidden costs of portfolio turnover often come to 0.5% to 1.0%; a 5% front-end sales load, amortized over a holding period of five to 10 years, adds another 0.5% to 1.0% per year in costs. "6 Lessons for Investors" by John Bogle on WSJ.com, January 8, 2009.
 
David Swenson from his book Unconventional Success: A Fundamental Approach to Personal Investment recommends that individual and under-resourced institutions should simply index their entire portfolio. Foundation and Endowment Investing, Lawrence Kochard and Cathleen Rittereiser, 2008.
 
Blue Haven Capital continues to focus on low investment management fees and low-cost funds for our customers, along with using individual fixed income securities. We recommend that investors take a look at all the fees, expenses and commissions associated with their current accounts and evaluate whether they are getting "value" for those fees. Remember, investment management expenses directly reduce the return on investment accounts.
 
We are certain that a low cost approach, as part of a long-term diversified investment strategy, will maximize investor returns. At Blue Haven Capital we believe that the less you spend, the more you make.