Barclays Wealth

Barclays Wealth

With the help of Cass Consulting, Barclays Wealth discovered that retail investors' habit of regularly adjusting their portfolio costs them up to 20% of their potential returns, and in some cases more.


Many investors believe that active fund managers struggle to generate alpha, that is, to outperform the market. Many people decide, on the basis of this, to run their own portfolio.

Barclays Wealth, a leading British wealth manager, asked two Cass academics to discover whether non-professionals really can read the markets well, what returns they get, and why.


Numerous studies have found that professional fund managers often do not generate alpha, and that even those who do find it difficult to replicate this performance over a long period of time.

However, the research carried out by the Cass academics discovered that retail investors also find it hard to outperform the market, because they time their investments badly.


Looking at data from 1992-2008 about the performance of UK mutual funds (unit trusts), collated by the Investment Management Association, the Cass academics analysed the "performance gap" between the amount that investors actually made, and what their returns would have been if they had employed a buy and hold strategy.

They found that UK retail investors in mutual funds on average had returns 1.2% per a year less than if they had employed a buy and hold strategy. Over the 18 year period of the study, compounded that represents a cumulative underperformance of 20%.

Those who invested in the best-performing funds lost even more, and their returns were 0.378% per month less than if they employed buy and hold. Investors in hedge funds made 4% less, and for the very best hedge funds the figure reached 9%.


The researchers concluded that the underperformance was caused by poor timing decisions. Retail investors tended to assume that funds which had performed well in the recent past would continue to do so in the future and they tended to buy at the top of the market.

The better performing the market, the harder it was to time entry well, and the investors who put their money into the funds with the highest recent performance had the worst results.

Cass consultants

Andrew Clare

Professor of Asset Management at Cass Business School

Professor Clare was formerly a Senior Research Manager in the Monetary Analysis wing of the Bank of England, which supported the Monetary Policy Committee. He has published many papers in academic and practitioner journals, and a 2007 survey ranked him the world's ninth most prolific finance author of the past 50 years. He serves on the investment committee of the £4bn GEC Marconi pension plan, and is a trustee and Chairman of the Investment Committee of the £3bn Magnox Electric Group Pension scheme.

Nick Motson

Lecturer in finance and a specialist in asset management, particularly hedge funds, alternative assets and structured products.

Before coming to Cass, Dr Motson worked for 13 years as a proprietary trader of interest rate derivatives in the City of London for various banks including First National Bank of Chicago, Industrial Bank of Japan and Wachovia Bank.

Read more about other Cass Consulting projects on the Case Studies page