Goldman Sachs is Nothing Special at Managing Money

By on May 1, 2010

Brett Arends reports on Goldman Sachs mutual funds which sock investors with high fees and mediocre to poor performance:

Goldman investors have also suffered from mediocre performance at many funds. Goldman likes to think it has the brightest minds in the room, but when I screened US Diversified Equity mutual funds for the top performers over the past 10 years, Goldman had only two in the top 100–Mid Cap value came 45th, and Small Cap Value at 61.

Karin Anderson, a mutual fund analyst at Morningstar, Inc., notes that many of Goldman’s fancy “structured” or quantitative funds have been particular duds over the past 10 years. Five out of six structured funds–such as Goldman Sachs Structured International Equity–have been in the bottom quartile of their peer group.

Perhaps it’s unfair of me to point this out, but over the past 10 years you would have been much better off investing in the stock of Goldman Sachs Group, Inc., than in most of its mutual funds. Goldman’s investors have made about 80%. Those in Structured Large Cap Value, say about 16%.

Many of the funds also hit investors with higher costs, too. “The fees tend to be high,” says Ms. Anderson. Most Goldman Sachs mutual funds come with a sales charge. For many it’s up to 5.5%. Very few mutual funds are worth those kinds of fees.

For many investors, the problem with Goldman Sachs mutual funds isn’t that they’re a disaster. Simply that they aren’t a great deal. You can find better investments elsewhere.

SMA Comment: This is fairly typical on Wall Street where a cache’ name brand buys nothing but yachts for the money managers and nothing for the customers. Investors would be better off buying index funds in various asset classes and re-balance their weighting once a year.

Source: The Wall Street Journal
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