Video: Buyer Beware — Don’t Be Fooled By Style Drift

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Allan Miller

The latest in FWB TV’s Evidence-based Investing series of videos is now available to view.  You can find it here at FWB TV or at Findependence.TV, where we house all videos.

Just under four minutes, this instalment features Alan Miller of the UK’s True and Fair Campaign and the phenomenon of style drift, which often afflicts actively managed funds.

Style Drift refers to a fund manager moving away from their stated objectives and can make fund returns misleading. Examples cited in the video are value funds buying growth stocks or vice versa, or even equity funds that buy bonds (the most notorious example of the latter being a former manager of the Fidelity Magellan Fund).

The video spends a good amount of time on the relative outperformance of small-cap stocks relative to large-caps. But even then it concludes that index funds will provide partial exposure to the small-cap return premium, without subjecting investors to undue risk.

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