International Investing

The headline quote from Gordon Gekko from the 1987 movie Wall Street show this has been common knowledge for decades: Fund managers cannot beat the index after fees.

According to this Bloomberg article, consumers are finally starting to catch on:

When Fidelity Investments opened the Magellan Fund in January to new shareholders for the first time in a decade, the company hoped to stem withdrawals. Instead, investors have pulled $1.8 billion from the $41 billion fund.

The reaction was the same at the Dodge & Cox Balanced Fund, which was shut for four years until February. The $29 billion fund suffered $824 million of net redemptions through May, according to estimates compiled by Chicago-based Morningstar Inc.

Outflows from these once best-selling U.S. mutual funds underscore the increasing reluctance of individual investors to pay managers to pick stocks, especially for subpar returns. Established names such as Magellan or Bill Miller’s Legg Mason Value Trust are no longer enough to attract billions of dollars of investors’ cash.

“I don’t care which fund is reopening, I’m not tempted to put my clients’ money in there,” said Bob Frey, founder of Bozeman, Montana-based Professional Financial Management Inc., who oversees about $70 million.