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mutual funds that invest in mutual funds...
Posted on 1/7/13 at 9:02 am
Posted on 1/7/13 at 9:02 am
What are the opinions of this? For example, TRowePrice TRSGX is an aggressive allocation fund that invests in 85% stock...Looking closer, a large portion of this is invested in TRowePrice sector mutual funds. What is the money talks opinion on this? Does one have to pay fees for TRSGX and also for the funds that TRSGX invests in? Basically, is the company getting twice the fees/income by taking my money, which I've invested in TRowePrice, and investing it back into a TRowePrice fund?
3
Posted on 1/7/13 at 9:27 am to The Hamburglar
Without digging into the fund too much, it doesn't seem that the expenses are unreasonable at .73, and it has a good track record of returns. I don't think you're being hit by double fees, Morningstar considers it a 4* fund.
Posted on 1/7/13 at 4:27 pm to The Hamburglar
quote:
What is the money talks opinion on this?
If the portfolio manager is very good and the underlying funds are good funds with good portfolio managers than it is a great strategy. However, if the funds are sub-par or the portfolio manager is sub-par than it becomes a bad strategy.
quote:
Does one have to pay fees for TRSGX and also for the funds that TRSGX invests in? Basically, is the company getting twice the fees/income by taking my money, which I've invested in TRowePrice, and investing it back into a TRowePrice fund?
You are hit twice on fees but not in a sense that you see. The fees for underlying funds are just reflected in the NAVs, same as the fund of funds.
My advice is to just make sure that the PM is good and the funds are good too. If they both are, you end up getting "layered alpha", where you have underlying funds that beat their benchmarks and the fund of funds that beats its benchmark. But this can also work in the opposite direction as well.
Posted on 1/7/13 at 9:12 pm to The Hamburglar
Lots of funds do this, especially with "target retirement" funds or "international" funds. They simply invest in a set ratio of other funds in the same family.
I've never run across double-dipping as you describe though. Mostly it's a way for someone else to set the allocation for you. I prefer more flexibility than that but if you want someone else to make that decision I don't see anything wrong with it.
I've never run across double-dipping as you describe though. Mostly it's a way for someone else to set the allocation for you. I prefer more flexibility than that but if you want someone else to make that decision I don't see anything wrong with it.
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